saudi basic industries corporation (sabic) … 2019...of the transaction, saudi aramco will own 70%...

SAUDI BASIC INDUSTRIES CORPORATION

(SABIC) AND ITS SUBSIDIARIES (A Saudi Joint Stock Company)

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019 AND

INDEPENDENT AUDITORS’ REPORT

SAUDI BASIC INDUSTRIES CORPORATION (SABIC) AND ITS SUBSIDIARIES

(A Saudi Joint Stock Company)

CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2019

Index Pages

Independent auditor’s report -

Consolidated statement of financial position 7 – 8

Consolidated statement of income 9

Consolidated statement of comprehensive income 10

Consolidated statement of changes in equity 11 – 12

Consolidated statement of cash flows 13 – 14

Notes to the consolidated financial statements 15 – 108



CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(All amounts in Saudi Riyals ‘000 unless otherwise stated)

The accompanying notes from 1 to 43 form an integral part of these consolidated financial statements.

7

Notes

As at

31 December

2019

As at

31 December

2018

Assets

Non-current assets

Property, plant and equipment 7 162,990,284 163,819,684

Right of use assets 8 7,065,965 -

Intangible assets 9 12,377,613 12,947,211

Investments in associates and joint ventures 10 23,350,394 25,780,550

Investments in debt instruments 11 1,345,592 2,493,880

Investments in equity instruments 12 1,046,009 1,090,109

Deferred tax assets 32 711,609 865,156

Other non-current assets 13 6,517,069 5,126,456

Total non-current assets 215,404,535 212,123,046

Current assets

Inventories 15 26,413,580 28,244,803

Trade receivables 16 18,322,552 21,821,849

Prepayments and other current assets 17 6,353,755 5,114,857

Short-term investments 18 5,558,554 9,815,499

Cash and bank balances 19 38,312,775 42,590,820

Total current assets 94,961,216 107,587,828

Total assets 310,365,751 319,710,874



CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)



8

Notes

As at

31 December

2019

As at

31 December

2018

Equity and liabilities

Equity

Share capital 20 30,000,000 30,000,000

Statutory reserve 21 15,000,000 15,000,000

General reserve 21 110,889,032 110,889,032

Other reserves 21 (3,265,084) (1,359,184)

Retained earnings 16,137,960 18,554,532

Equity attributable to equity holders of the Parent 168,761,908 173,084,380

Non-controlling interests 22 42,489,414 48,352,095

Total equity 211,251,322 221,436,475

Non-current liabilities

Long-term debt 23 34,460,362 41,691,973

Lease liabilities 23 5,767,063 653,423

Employee benefits 24 18,048,848 15,000,025

Deferred tax liabilities 32 1,612,749 1,664,138

Other non-current liabilities 1,778,171 1,384,327

Total non-current liabilities 61,667,193 60,393,886

Current liabilities

Short-term borrowings 23 1,346,996 1,167,589

Current portion of long-term debt 23 6,889,292 3,664,754

Current portion of lease liabilities 23 1,271,843 85,502

Trade payables 25 12,888,175 14,969,357

Accruals and other current liabilities 26 11,569,414 13,396,472

Zakat and income tax payable 32 3,481,516 4,596,839

Total current liabilities 37,447,236 37,880,513

Total liabilities 99,114,429 98,274,399

Total equity and liabilities 310,365,751 319,710,874



CONSOLIDATED STATEMENT OF INCOME



9

Notes For the year ended

31 December 2019

For the year ended

31 December 2018

Revenue 28 139,737,384 169,128,339

Cost of sales 29 (104,217,191) (111,287,016)

Gross profit 35,520,193 57,841,323

General and administrative expenses 29 (10,677,188) (11,161,018)

Selling and distribution expenses 29 (10,009,998) (10,399,937)

Income from operations 14,833,007 36,280,368

Share of results of associates and joint ventures 10 (1,595,349) 1,049,850

Finance income 34 1,123,117 1,422,720

Finance cost 30 & 34 (2,550,073) (2,646,115)

(1,426,956) (1,223,395)

Other expenses, net 31 (128,396) (423,755)

Income before zakat and income tax 11,682,306 35,683,068

Zakat expense 32 (2,100,000) (2,600,000)

Income tax expense 32 (1,119,470) (1,197,661)

Net income for the year 8,462,836 31,885,407

Attributable to:

Equity holders of the Parent 5,563,271 21,520,678

Non-controlling interests 2,899,565 10,364,729

8,462,836 31,885,407

Basic and diluted earnings per share (Saudi Riyals)

Earnings per share from income from operations 33 4.94 12.09

Earnings per share from net income attributable to

equity holders of the Parent 33 1.85

7.17



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME



10

Notes For the year ended

31 December 2019

For the year ended

31 December 2018

Net income for the year 8,462,836 31,885,407

Other comprehensive income

Items that will not be reclassified to the consolidated statement of income (net of tax):

- Re-measurement (loss) gain on defined benefit plans 24 (1,785,354) 2,147,893

- Share of other comprehensive (loss) income of

associates and joint ventures 10 & 21

(30,764) 1,596

- Net change on revaluation of investments in equity

instruments at FVOCI 21

(137,060) 4,880

- Deferred tax expense 32 (10,401) (5,204)

(1,963,579) 2,149,165

Items that will be reclassified to the consolidated statement of income:

- Exchange difference on translation of foreign operations 21 (328,231) (1,301,215)

- Share of other comprehensive income of associates and

joint ventures 10 & 21

4,817 52,181

(323,414) (1,249,034)

Movement of other comprehensive (loss) income (2,286,993) 900,131

Total comprehensive income for the year 6,175,843 32,785,538

Attributable to:

Equity holders of the Parent 3,642,217 22,022,132

Non-controlling interests 2,533,626 10,763,406

6,175,843 32,785,538



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY



11

Attributable to the equity holders of the Parent

Share

capital

Statutory

reserve

General

reserve

Other

reserves

Retained

earnings Total

Non-

controlling

interests Total equity

Balance as at 31 December 2018 30,000,000 15,000,000 110,889,032 (1,359,184) 18,554,532 173,084,380 48,352,095 221,436,475

Net income - - - - 5,563,271 5,563,271 2,899,565 8,462,836

Other comprehensive loss - - - (1,921,054) - (1,921,054) (365,939) (2,286,993)

Total comprehensive (loss) income - - - (1,921,054) 5,563,271 3,642,217 2,533,626 6,175,843

Acquisition of non-controlling

interests (Note 22) - - - 15,154 5,220,157 5,235,311 (847,811) 4,387,500

Transfer of non-controlling interests

to non-current liabilities (Note 22) - - - - - - (689,194) (689,194)

Dividends (Note 40) - - - - (13,200,000) (13,200,000) (6,859,302) (20,059,302)




CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)



12

Attributable to the equity holders of the Parent

Share

capital

Statutory

reserve

General

reserve

Other

reserves

Retained

earnings Total

Non-

controlling

interests Total equity


Adoption of IFRS 9 and IFRS 15 - - - 389,025 (48,410) 340,615 1,539 342,154

Balance as at 1 January 2018 30,000,000 15,000,000 110,889,032 (1,860,638) 10,233,854 164,262,248 46,218,398 210,480,646

Net income for the year - - - - 21,520,678 21,520,678 10,364,729 31,885,407

Other comprehensive income - - - 501,454 - 501,454 398,677 900,131

Total comprehensive income - - - 501,454 21,520,678 22,022,132 10,763,406 32,785,538

Dividends - - - - (13,200,000) (13,200,000) (8,629,709) (21,829,709)




CONSOLIDATED STATEMENT OF CASH FLOWS



13

Notes

For the year

ended 31

December 2019

For the year

ended 31

December 2018

Operating activities:


Adjustment to reconcile income before zakat and income tax to net cash from operating activities:

- Depreciation of property, plant and equipment 7 14,453,281 14,472,437

- Depreciation of right of use assets 8 1,603,705 -

- Amortisation of intangible assets 9 652,679 663,644

- Impairments and write-offs of plant and equipment and

intangible assets 7 & 9 3,875,673

365,484

- Impairments on equity instruments 14,084 -

- Provision for slow moving and obsolete inventories, net 15 (21,628) (60,228)

- Provision for doubtful debts, net 16 (79,396) 3,320

- Share of results of associates and joint ventures 10 80,349 (1,049,850)

- Impairment provision of associates and joint ventures 10 1,515,000 -

- Fair value adjustment to derivatives, net 29,270 (39,206)

- Loss on sale/disposals of property, plant and equipment 31 110,808 179,700

- Finance costs 30 2,550,073 2,646,115

Changes in operating assets and liabilities:

Decrease in other non-current assets 1,529,401 774,757

Decrease (increase) in inventories 1,852,851 (2,121,581)

Decrease in trade receivables 3,578,692 744,653

Decrease in prepayments and other current assets 15,272 881,779

(Decrease) increase in other non-current liabilities (292,088) 185,249

Decrease in trade payables (2,081,182) (3,092,107)

Increase (decrease) in employee benefits 679,268 (1,048,193)

(Decrease) increase in accruals and other current liabilities (249,592) 1,592,453

Cash from operations 41,498,826 50,781,494

Finance cost paid (1,715,973) (2,002,413)

Zakat and income tax paid 32 (4,209,924) (4,007,987)

Net cash from operating activities 35,572,929 44,771,094



CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)



14

Notes

For the year

ended 31

December 2019

For the year

ended 31

December 2018

Investing activities:

Purchase of property, plant and equipment 7 (19,618,362) (14,165,177)

Short-term investments, net 4,860,469 (5,279,537)

Proceeds on the maturity of investments in debt instruments 618,770 402,040

Purchase of intangible assets 9 (236,826) (71,058)

Proceeds from sale/disposals of property, plant and

equipment

-

48,605

Purchase of debt instruments (92,288) -

Purchase of equity instruments (55,413) (46,031)

Investments in associates and joint ventures 10 (338,271) (10,954,760)

Dividend received from associates and joint ventures 10 1,171,465 462,361

Net cash used in investing activities (13,690,456) (29,603,557)

Financing activities:

Proceeds from debt 9,385,880 26,787,021

Repayment of debt (13,658,938) (37,480,836)

Lease payments (1,721,145) (187,113)

Dividends paid to shareholders (13,190,127) (12,059,538)

Dividends paid to non-controlling interests (8,228,095) (8,736,246)

Acquisition of non-controlling interests 22 1,125,000 -

Net cash used in financing activities 19 (26,287,425) (31,676,712)

Decrease in cash and cash equivalents (4,404,952) (16,509,175)

Net foreign exchange loss on cash and cash equivalents (52,500) (41,250)

Cash and cash equivalents at the beginning of the year 19 41,423,231 57,973,656

Cash and cash equivalents at the end of the year 19 36,965,779 41,423,231



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



15

1. Corporate information

Saudi Basic Industries Corporation (“SABIC” or “the Parent”) is a Saudi Joint Stock Company established

pursuant to Royal Decree Number M/66 dated 13 Ramadan 1396H (corresponding to 6 September 1976)

registered in Riyadh under commercial registration No. 1010010813 dated 14 Muharram 1397H (corresponding

to 4 January 1977). SABIC is 70% owned by the Government of the Kingdom of Saudi Arabia (“KSA”) through

the Public Investment Fund (“PIF”) and 30% by the private sector. The registered office is located at Qurtubah

district, P.O. Box 5101, Riyadh 11422, KSA.

On 27 March 2019, PIF and Saudi Arabian Oil Company (“Saudi Aramco”) have signed a share purchase

agreement pursuant to which Saudi Aramco has agreed to acquire all of PIF’s stake in SABIC. Completion of

the transaction is subject to customary closing conditions, including regulatory approvals. Upon completion

of the transaction, Saudi Aramco will own 70% of SABIC’s issued share capital.

At the end 2019, SABIC entered into a share-purchase agreement with Saudi Arabian Fertilizer Company

(“SAFCO”), a listed subsidiary at Saudi Stock Exchange (“Tadawul”), under which SAFCO will acquire SABIC

Agri-Nutrients Investment Company (“SANIC”) in exchange for shares which will increase SABIC’s

shareholding in SAFCO from 42.99% to 50.1%, subject to shareholder and regulatory approvals.

SABIC and its subsidiaries (collectively the “Group”) are engaged in manufacturing, marketing and distribution

of chemicals, polymers, high performance plastics, agri-nutrients and metal products in global markets.

The consolidated financial statements of the Group for the year ended 31 December 2019 were authorised for

issue in accordance with a resolution of the Board of Directors on 3 March 2020.

2. Basis of preparation and accounting policies

2.1 Basis of preparation

These consolidated financial statements have been prepared in accordance with International Financial

Reporting Standards (“IFRS”) and its interpretations as issued by the International Accounting Standards

Board (“IASB”) as endorsed in KSA and other standards and pronouncements that are endorsed by the Saudi

Organisation for Certified Public Accountants (“SOCPA”) (collectively referred to as “IFRS as endorsed in KSA”).

Certain prior period’s figures have been reclassified to conform to the current period’s presentation (Note 39).

The consolidated financial statements are prepared under the historical cost convention, except for financial

instruments, which are measured at fair value at the end of each reporting period. Historical cost is generally

based on the fair value of the consideration given in exchange for goods and services at the time of the

transaction.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date, regardless whether that price is directly

observable or estimated using another technique. In estimating the fair value of an asset or a liability, the Group

takes into account the characteristics of the asset or liability, if market participants would take those

characteristics into account when pricing the asset or liability at the measurement date. Fair value for

measurement and/or disclosure purposes in these consolidated financial statements is determined on such a

basis, except for leasing transactions that are within the scope of IFRS 16 ‘Leases’, and measurements that have

some similarities to fair value but are not fair value, such as net realizable value in IAS 2 ‘Inventories’ or value in

use in IAS 36 ‘Impairment of Assets’.

The Group has categorized its financial assets and liabilities into a three-level fair value hierarchy, based on the

degree to which the lowest level inputs to fair value measurement are observable and the significance of the

inputs to the fair value measurement as a whole, which are described as follows:

Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2: Valuation techniques for which the lowest level input that is significant to the fair value

measurement is directly or indirectly observable

Level 3: Valuation techniques for which the lowest level input that is significant to the fair value

measurement is unobservable



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



16

2. Basis of preparation and accounting policies (continued)

2.2 Basis of consolidation

The consolidated financial statements comprise the financial statements of SABIC and subsidiaries controlled

by SABIC, except for joint operations which are consolidated based on the Group’s relative share in the

arrangement.

Consolidation of a subsidiary begins when SABIC obtains control over the subsidiary and ceases when SABIC

loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed

during the period are included in the consolidated financial statements from the date SABIC gains control until

the date SABIC ceases to control the subsidiary. Refer Note 3.2.2 for judgements applied by SABIC to assess

control. SABIC re-assesses whether or not it controls an investee if facts and circumstances indicate that there

are changes to the elements of control.

Net income or loss and each component of Other Comprehensive Income (“OCI”) are attributed to the equity

holders of the Parent of the Group and to the non-controlling interests, even if this results in the non-

controlling interests having a deficit balance. When necessary, adjustments are made to the financial

statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All

intra-group asset and liabilities, equity, income, expenses and cash flows relating to transactions between

members of the Group are eliminated in full on consolidation.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated

statement of financial position, consolidated statement of income, consolidated statement of comprehensive

income and consolidated statement of changes in equity. A change in the ownership interest of a subsidiary,

without a loss of control, is accounted for as an equity transaction.

If SABIC loses control over a subsidiary, it de-recognises the related assets (including goodwill, if applicable),

liabilities, non-controlling interests and other components of equity, while any resulting gain or loss is

recognised in the consolidated statement of income.

2.3 Foreign currencies

The consolidated financial statements are presented in Saudi Riyals (SR), which is the functional currency of

the Parent. For each entity, the Group determines the functional currency and items included in the financial

statements of each entity are measured using that functional currency.

Transactions and balances

Transactions in foreign currencies are initially recorded by the Group’s subsidiaries at their respective

functional currencies’ spot rates at transaction date. Monetary assets and liabilities denominated in foreign

currencies are translated at the functional currency spot rates of exchange at the reporting date.

Differences arising on settlement or translation of monetary items are recognised in the consolidated

statement of income. These are recognised in OCI until the net investment is disposed, at which time, the

cumulative amount is reclassified to consolidated statement of income. Tax charges and credits attributable

to exchange differences on those monetary items are also recorded in OCI.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using

the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a

foreign currency are translated using the exchange rates at the date when the fair value is determined. The

gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the

recognition of gain or loss on change in fair value of the item.






17

2. Basis of preparation and accounting policies (continued)

2.3 Foreign currencies (continued)

Group’s companies

On consolidation, the assets and liabilities of foreign operations are translated into SR at the rate of exchange

prevailing at the reporting date and their statements of income are translated at exchange rates prevailing at

the transactions dates. The exchange differences arising on translation for consolidation are recognised in

OCI. On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is

recognised in the consolidated statement of income.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying

amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign

operation and translated at the spot rate of exchange at the reporting date.

3. Significant accounting estimates, assumptions and judgements

The preparation of the Group’s financial statements requires management to make judgements, estimates

and assumptions at reporting date that affect the reported amounts of revenues, expenses, assets and

liabilities, and the disclosure of contingent liabilities. However, uncertainty about these assumptions and

estimates could result in outcomes that could require material adjustments in the future to the carrying

amount of the asset or liability affected.

The estimates and assumptions are based upon experience and various other factors that are believed to be

reasonable under the circumstances and are used to judge the carrying values of assets and liabilities that

are not readily apparent from other sources. The estimates and underlying assumptions are reviewed on an

ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are

revised, if the changed estimates affect both current and future periods.

Other disclosures relating to the Group’s exposure to risks and uncertainties include:

Capital management, financial instrument risk management and policies (Note 37)

Sensitivity analysis disclosures (Notes 24 and 37)

3.1 Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting

date, that have a significant risk of causing material differences in the carrying amounts of assets and liabilities

within the next financial period, are disclosed below. The Group used these assumptions and estimates on

the basis available when the consolidated financial statements were prepared. However, existing

circumstances and assumptions about future developments may change due to market changes or

circumstances arising that are beyond the control of the Group. Such changes are reflected in the

assumptions when they occur.

3.1.1 Impairment of non-financial assets

Impairment exists when the carrying value of an asset or Cash Generating Unit ("CGU") exceeds its

recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair

value less costs of disposal is based on available data from binding sales transactions, conducted at arm’s

length, for similar assets or observable market prices less incremental costs for disposing the asset. The value

in use is based on a Discounted Cash Flow ("DCF") model. The cash flows are derived from the budget and

business plan for the next five years and do not include restructuring activities that the Group is not yet

committed to or significant future investments that will enhance the performance of the CGU being tested.

The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future

net cash-inflows and the growth rate used for extrapolation purposes. The key assumptions used to

determine the recoverable amount for the different CGUs are disclosed in Notes 7 and 9.






18

3. Significant accounting estimates, assumptions and judgements (continued)

3.1 Estimates and assumptions (continued)

3.1.2 Incremental borrowing rate for lease agreements (Notes 8 and 23)

The Group cannot readily determine the interest rate implicit in the lease agreement, therefore, it uses its

Incremental Borrowing Rate (“IBR”) to measure lease liabilities. The IBR is the rate of interest that the Group

would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an

asset of a similar value to the right of use asset in a similar economic environment. The IBR therefore reflects

what the Group ‘would have to pay’, which requires estimation when no observable rates are available, such

as for subsidiaries that do not enter into financing transactions or when they need to be adjusted to reflect

the terms and conditions of the lease. The Group estimates the IBR using observable inputs, such as market

interest rates when available and is required to make certain entity-specific estimates.

3.1.3 Measurement of financial instruments (Notes 11, 12, 14 & 16)

The Group is required to make judgements about:

The regional and business related risk profiles of the Group’s customers to assess the Expected Credit

Losses (“ECL”) on trade receivables.

The basis to determine the fair value of its investments in equity instruments, in reference to similar kind

of investments being sold in the market. The selection of the investments to determine the basis requires

judgement by management to recognise investments in equity instruments. For fair value determination,

these investments qualify as Level 3 (Note 2).

3.1.4 Provisions

By their nature, the measurement of provisions depend upon estimates and assessments whether the criteria

for recognition have been met, including estimates of the probability of cash outflows. The Group’s estimates

related to provisions for environmental matters are based on the nature and seriousness of the

contamination, as well as on the technology required for remediation. Provisions for litigation are based on

an estimate of costs, taking into account legal advice and other information available.

3.1.5 Defined employee benefit plans (Note 24)

Post-employment defined benefits plans, end-of-service benefits plans, indemnity payments and other long-

term employee related liabilities represent obligations that will be settled in the future and require actuarial

valuations to determine these obligations. The Group is required to make assumptions regarding variables

such as discount rates, rate of salary increase, longevity, employee turnover and future healthcare costs, if

applicable. Changes in key assumptions can have a significant impact on the projected benefit obligations

and employee defined benefit costs. The assumptions are reviewed each reporting date.

Defined benefit obligations are discounted at a rate set by reference to relevant market yields at the end of

the reporting period on high quality corporate or government bonds. Significant judgement is required when

setting the criteria for bonds to be included in the population from which the yield curve is derived. The most

significant criteria considered for the selection of bonds include the size of the bonds, quality of the corporate

bonds and the identification of outliers which are excluded, if any.

3.1.6 Accounting for income tax (Note 32)

As part of the process of preparing consolidated financial statements, the Group estimates income tax in each

of the jurisdictions it operates. This process involves estimating current tax expense and temporary

differences between carrying amounts of assets and liabilities for financial reporting purposes and the related

tax bases. Temporary differences result in deferred tax assets and liabilities, which are included in the

consolidated statement of financial position. Deferred tax assets and liabilities are carried at nominal value.






19


3.1 Estimates and assumptions (continued)

3.1.6 Accounting for income tax (Note 32) (continued)

The Group assesses periodically the likelihood whether deferred tax assets will be recovered from future

taxable income, to the extent these deferred tax assets are recorded. Deferred tax assets are recognised for

unused tax losses to the extent that it is probable that the taxable profit will be available against which the

losses can be utilised. Significant management judgement is required to determine the amount of deferred

tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together

with future tax planning strategies.

3.1.7 Accounting for options on own equity instruments

Call and put options on the Group’s own equity instruments are recognised at Fair Value through Income

Statement (“FVIS”) at the end of each reporting period, if material. Estimating the fair value of these options

requires determination of the most appropriate valuation model, which depends on the terms and conditions

of the underlying joint venture agreement. This estimate requires determination of the expected life of the

share option or appreciation right, probability of exercising of option, volatility and dividend yield and making

assumptions about them.

3.2 Critical judgements in applying accounting standards

In addition to the application of the judgement in the above-mentioned estimates and assumptions, the

following critical judgements have the most significant effect on the amounts recognised in the consolidated

financial statements:

3.2.1 Component parts of plant and equipment

The Group’s plant and equipment are broken down into significant components and depreciated on a

straight-line basis over their economic useful lives. Judgement is required in ascertaining the significant

components of a larger asset. In defining the significance of a component, the Group considers quantitative

materiality of the component part as well as qualitative factors such as difference in useful life as compared

to related asset.

3.2.2 Determination of control, joint control and significant influence

Subsidiaries are all investees over which the Group has control. Management considers that it controls an

entity when the Group is exposed to or has rights to the majority of the variable returns from its involvement

with the investee and the ability to use its power over the investee to affect the amount of those returns

through its power to direct the relevant activities of the investees.

Generally, there is a presumption that a majority of voting rights results in control. To support this

presumption and when the Group has equal or less than a majority of the voting or similar rights of an

investee, the Group considers all other relevant facts and circumstances in assessing whether it has power

over an investee, including any contractual and other such arrangements which may affect the activities which

impact investees’ return.

3.2.2.1 Assessing control over consolidated subsidiaries

The determination about whether the Group has power depends on such relevant activities, the way decisions

about the relevant activities are made and the rights the Group has, in relation to the investees.

In certain cases where the Group owns less than 50% of voting rights, it may still be the single largest

shareholder with presence on the governing body giving it power to direct relevant activities of the investees,

whereby the other shareholders individually do not hold sufficient voting rights and power to overrule the

Group’s directions. There is no prior instance of other shareholders collaborating to exercise their votes

collectively or to out-vote the Group.






20


3.2 Critical judgements in applying accounting standards (continued)

3.2.2.1 Assessing control over consolidated subsidiaries (continued)

Management has considered the integration of all KSA investees (where the Group has equal or less than a

majority of the voting rights) within the Group structure and located in the industrial cities in KSA, the ability

of the Group to impact the majority of the variable returns of the investees through the provision of various

key services to such investees, the relationship of the Group with other entities which may impact returns of

investees, appointment of certain key management personnel and various other such factors.

Based on above considerations, the Group believes:

There is a pattern of past and existing practice of the Group’s involvement in the relevant activities of

these investees resulting in an impact on their returns and also indicating a more than passive interest of

the Group in such investees; and

The Group has created an ecosystem in which the set-up and function of these investees and their inter-

relationship with the Group leads towards a judgement of ‘control’.

Hence, the Group has consolidated those KSA investees, which meet the above criteria as part of the Group’s

consolidated financial statements.

3.2.3 Determining the lease term of contracts with renewal and terminations options

The Group determines the lease term as the non-cancellable term of the lease, together with any periods

covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by

an option to terminate the lease, if it is reasonably certain not to be exercised.

The Group has several lease contracts that include extension and termination clauses. The Group applies

judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or

terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise

either the renal or termination. After the commencement date, the Group reassesses the lease term if there

is a significant event or change in the circumstances that is within its control and affects its ability to exercise

or not to exercise the option to renew or to terminate the contract.

4. Changes in accounting policies

IFRS 16 – Leases

The Group has adopted IFRS 16 from its mandatory adoption date 1 January 2019 using the modified

retrospective transition approach as permitted under the specific transition provisions in the standard. As a

result, comparatives have not been restated.

The Group has not used the transition practical expedient of applying IFRS 16 to only those contracts that were

previously identified as leases under IAS 17 (and IFRIC 4). In adopting IFRS 16, the Group has applied the

following practical expedients:

The use of a single discount rate to a portfolio of leases with reasonably similar characteristics

Accounting for operating leases with a remaining lease term of less than 12 months at 1 January 2019 as

short-term leases

Exclusion of initial direct costs for the measurement of the right of use asset at the date of initial

application

The use of hindsight in determining the lease term where the contract contains options to extend or

terminate the lease

The election, by class of underlying asset, not to separate non-lease components from lease components,

and instead account for each lease component and any associated non-lease components as a single

lease component.






21

4. Changes in accounting policies (continued)

IFRS 16 – Leases (continued)

As at 1 January 2019, the Group has recognised lease liabilities amounting to SR 6.83 billion and associated

right of use assets amounting to SR 7.29 billion in relation to contracts that have been concluded as leases

under the principles of IFRS 16. The lease assets and liabilities previously recognised under finance leases,

included under ”Property, plant and equipment” were derecognised and additional lease liabilities were

recognised under “Debts”. The liabilities were measured at the present value of the remaining lease

payments, discounted using the Group’s incremental borrowing rate. The associated right of use assets are

measured at the amount equal to the lease liabilities, adjusted by the amount of prepayments relating to that

lease recognised in the consolidated statement of financial position as at 31 December 2018. The Group’s

weighted average incremental borrowing rate applied to the lease liabilities was 4.04%.

The following table shows the reconciliation of operating lease commitments under IAS 17 “Leases” to the

lease liabilities under IFRS 16 on 1 January 2019:

1 January 2019

Operating lease commitments disclosed as at 31 December 2018 8,905,562

Less: discount using the Group’s incremental borrowing rate (1,980,916)

Less: short-term leases recognised on a straight-line basis as expense (190,859)

Less: low-value leases recognised on a straight-line basis as expense (19,493)

Add: contracts reassessed as lease agreements 118,287

6,832,581

Add: finance lease liabilities recognised as at 31 December 2018 738,925

Lease liabilities recognised as at 1 January 2019 7,571,506

IFRIC Interpretation 23 - Uncertainty over Income Tax Treatment

The Interpretation addresses accounting for income taxes when tax treatments involve uncertainty that

affects the application of IAS 12 ‘Income Taxes’ (“IAS 12”) and does not apply to taxes or levies outside the

scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with

uncertain tax treatments.

The interpretation specifically addresses the following:

Whether an entity considers uncertain tax treatments separately

The assumptions an entity makes about the examination of tax treatments by taxation authorities

How an entity determines taxable results, tax bases, unused tax losses, unused tax credits and tax rates

How an entity considers changes in facts and circumstances

An entity must determine whether to consider each uncertain tax treatment separately or together with one

or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty

should be followed. The Interpretation did not have an impact on the consolidated financial statements of the

Group.

Amendments to IAS 19: Plan Amendment, Curtailment or Settlement

The Amendments to IAS 19 ‘Employee Benefits’ specifies how companies determine pension expenses when

changes to a defined benefit pension plan occur. The Amendments require a company to use the updated

assumptions from this re-measurement to determine current service cost and net interest for the remainder

of the reporting period after the change to the plan.

The amendments had no impact on the consolidated financial statements of the Group as it did not have any

plan amendments, curtailments, or settlements during the period.






22

5. New IFRS issued but not yet effective

The IFRS standards and interpretations that are issued and relevant for the Group, but not yet effective, up to

the date of issuance of the Group’s consolidated financial statements are elaborated below. These standards

will be adopted by the Group when they become effective.

Amendment to IFRS 3 – Business Combinations

The Amendment narrowed and clarified the definition of a business. It also permits a simplified assessment of

whether an acquired set of activities and assets is a group of assets rather than a business. The Amendment is

effective for business combinations which are entered into for annual reporting periods beginning on or after 1

January 2020. The Group will apply the Amendment from its effective date.

Amendments to IFRS 1 – Classification of Liabilities as Current or Non-Current

The Amendments in ‘Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)’ affect only

the presentation of liabilities in the statement of financial position, not the amount or timing of recognition of

any asset, liability income or expenses, or the information that entities disclose about those items. They clarify

that:

The classification of liabilities as current or non-current should be assessed on rights that are in existence

at the end of the reporting period.

Settlement refers to the transfer to the counterparty of cash, equity instruments or other assets or services.

The Amendments are effective from annual periods beginning on or after 1 January 2022 and should be applied

retrospectively. Early adoption is permitted. The Group already applied these Amendments.

6. Summary of significant accounting polices

The significant accounting policies adopted by the Group in preparing these consolidated financial

statements are applied consistently and are described below:

Business combinations and goodwill

Business combinations are accounted for applying the acquisition method. The cost of an acquisition is

measured as the aggregate of the consideration transferred which is measured at fair value on the acquisition

date and the amount of any non-controlling interests in the acquiree. For each business combination, the

Group elects whether to measure the non-controlling interests in the acquiree at fair value or at proportionate

share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed in the consolidated

statement of income when incurred.

When the Group acquires a business, it assesses the financial assets acquired and financials liabilities

assumed for appropriate classification and designation in accordance with the contractual terms, economic

circumstances and pertinent conditions as at the acquisition date. Any contingent consideration to be

transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration

classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 is measured at

fair value with the changes in fair value recognised in the consolidated statement of income or OCI.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and

the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable

assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate

consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired

and all of the liabilities assumed. If the reassessment still results in an excess the gain is recognised in the

consolidated statement of income.






23

6. Summary of significant accounting polices (continued)

Business combinations and goodwill (continued)

After initial recognition, goodwill is measured at cost less any accumulated impairment losses, if applicable.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition

date, allocated to each of the Group’s CGUs that are expected to have benefit from the combination,

irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill

has been allocated to a CGU and part of the operation within that unit is disposed off, the goodwill associated

with the disposed operation is included in the carrying amount of the operation when determining the gain or

loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the

disposed operation and the portion of the CGU retained.

Investments in associates and joint arrangements

Investments in associates

An associate is an entity over which the Group has significant influence. Significant influence is the power to

participate in the financial and operating policy decisions of the investee, but is not control or joint control

over those policies. Judgement is required, particularly where the Group owns shareholding and voting rights

of generally 15% and above, the Group assessed not to have ‘control’ or ‘joint control’ over such investees.

Investments in joint arrangements

Investments in joint arrangements are classified as either joint operations or joint ventures. The classification

depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint

arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only

when decisions about the relevant activities require unanimous consent of the parties sharing control.

Joint operations

A joint operation is an arrangement whereby the parties that have joint control on the arrangement have

rights to the assets, and obligations for the liabilities, relating to the arrangement. The Group recognises

its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any

jointly held assets or incurred liabilities, revenues and expenses for its joint operations.

Joint ventures

A joint venture is a type of joint arrangement whereby the parties that have joint control of the

arrangement have rights to the net assets of the joint venture. Interests in joint ventures are accounted

for using the equity method, after initially being recognised at cost in the consolidated statement of

financial position.

Under the equity method of accounting, the investments in an associate or joint venture are initially

recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition results in

the consolidated statement of income, and the Group’s share of movements in OCI in the consolidated

statement of comprehensive income. Dividends received or receivable from associates and joint ventures are

recognised as a reduction in the carrying amount of the investment.

When the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the

entity, including any other unsecured long-term receivables, the Group does not recognise further losses,

unless it is liable due to constructive or legal obligations on behalf of the other entity.

Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to

the extent of the Group’s interest in these entities. Unrealised losses are also eliminated unless the

transaction provides evidence of an impairment of the asset transferred.

Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures

and recognises any retained investment at its fair value. Any difference between the carrying amount of the

associate or joint venture upon loss of significant influence or joint control and the fair value of the retained

investment and proceeds from disposal is recognised in the consolidated statement of income.






24


Investments in associates and joint arrangements (continued)

When the Group ceases to consolidate or equity account for an investment because of a loss of control, joint

control or significant influence, any retained interest in the entity is re-measured to its fair value with the

change in carrying amount recognised in the consolidated statement of income. This fair value becomes the

initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate,

joint venture or financial asset. In addition, any amounts previously recognised in OCI in respect of that entity

are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that

amounts previously recognised in OCI are reclassified to the consolidated statement of income.

If the ownership interest in a joint venture or an associate is reduced but joint control or significant influence

is retained, only a proportionate share of the amounts previously recognised in OCI, except for the items that

will not be reclassified to the consolidated statement of comprehensive income, are reclassified to the

consolidated statement of income, where appropriate.

Current versus non-current classification

The Group presents assets and liabilities in the consolidated statement of financial position based on current

and non-current classification. An asset is current when it is:

Expected to be realised or intended to be sold or consumed in normal operating cycle

Expected to be realised within twelve months after the reporting period or

Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least

twelve months after the reporting period.

All other assets are classified as non-current.

A liability is current when it is due to be settled within twelve months after the reporting period. The Group

classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

Zakat and tax

Zakat

Zakat is levied based on adjusted income subject to zakat or the zakat base in accordance with the Regulations

of the General Authority of Zakat and Tax (“GAZT”) in KSA whatever is higher. The Group computes its zakat

by using the zakat base. The zakat provision is charged to the consolidated statement of income. Differences,

if any, resulting from the final assessments are adjusted in the period of their finalisation.

Current Income tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid

to the relevant tax authorities.

Deferred tax

Deferred tax is provided for using the balance sheet method on temporary differences at the reporting date

between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when

the asset is realised or the liability is settled, based on tax rates and tax law enacted or substantively enacted

at the reporting date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right

exists to set off current tax assets and current tax liabilities and the deferred taxes relate to the same taxable

entity and the same tax authority. The carrying amount of deferred tax assets is reviewed at each reporting

date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to

allow all or part of the deferred tax asset to be utilised.






25


Property, plant and equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated

impairment losses, if any. Such costs include the cost of replacing part of the plant and equipment and

borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts

of plant and equipment are required to be replaced in intervals, the Group recognises and depreciates them

separately based on its specific useful lives. Likewise, when a major inspection is performed, its cost is

recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are

satisfied. All other repair and maintenance costs are recognised in the consolidated statement of income as

incurred. The present value of the expected cost for the decommissioning of the asset after its use is included

in the cost of the respective asset if the recognition criteria for a provision are met.

Depreciation is calculated on a straight-line basis over the useful life of the asset as follows:

Buildings 13 to 40 years

Plant and equipment 4 to 50 years

Furniture, fixtures and vehicles 3 to 10 years

Land and assets under construction, which are not ready for their intended use, are not depreciated.

An item of property, plant and equipment and any significant part initially recognised is de-recognised upon

disposal or when no future economic benefits are expected from its continued use or disposal. Any gain or

loss arising on de-recognising the asset (calculated as the difference between the net disposal proceeds and

the carrying amount of the asset) is included in the consolidated statement of income when the asset is de-

recognised.

The assets’ residual values, useful lives and methods of depreciation are periodically reviewed, and adjusted

prospectively in case of a significant change in the assets technological capabilities or estimated planned use.

Group as lessee

Leases are recognised as right of use assets along with their corresponding liabilities at the date of which the

leased assets are available for use by the Group. Each lease payment is allocated between the liability and

finance cost. The finance cost is recognised in the consolidated statement of income over the lease term. The

right of use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line

basis.

Right of use assets are initially measured at cost comprising the amount of the initial measurement of lease

liability, any lease payments made at or before the commencement date less any lease incentives received,

any initial direct costs, and restoration costs; if applicable.

Lease liabilities include, if applicable, the net present value of fixed payments including in-substance fixed

payments, less any lease incentives receivable, variable lease payment that are based on an index or a rate,

amounts expected to be payable by the lessee under residual value guarantees, the exercise price of a

purchase option if the lessee is reasonably certain to exercise that option, and payments of penalties for

terminating the lease, if the lease term reflects the lessee exercising that option.






26


Leases

Short-term and low value assets’ leases Short-term leases are leases with a lease term of 12 months or less. Low-value assets are items that do not

meet the Group’s capitalisation threshold and are considered to be insignificant for the statement of financial

position for the Group as a whole. Payments for short-term leases and leases of low-value assets are

recognised on a straight-line basis in the consolidated statement of income.

Variable lease payments Some leases contain variable payments that are linked to the usage or performance of the leased asset. Such

payments are recognised in the consolidated statement of income.

Extension and termination options In determining the lease term, management considers all facts and circumstances that create an economic

incentive to exercise an extension option, or not to exercise a termination option. Extension options or periods

after termination options are only included in the lease term if the lease is reasonably certain to be extended

or not terminated. The Group assesses at lease commencement whether it is reasonably certain to exercise

the extension options. The Group reassesses whether it is reasonably certain to exercise the options if there

is a significant event or significant change in circumstances within control.

Group as a lessor

Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of

an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over

the lease terms and is included in revenue in the consolidated statement of income due to its operating

nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying

amount of the leased asset and recognised over the lease term on the same basis as rental income.

Contingent rents are recognised as revenue in the period in which they are earned.






27


Borrowing costs

Borrowing costs consist of interest and other costs that the Group incurs in connection with the borrowing of

funds. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset

that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as

part of the costs of these assets, until such time as the asset is substantially ready for its intended use.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on

qualifying assets is deducted for the borrowing costs eligible for capitalization. All other borrowing costs are

expensed in the period they occur.

Intangible assets

Intangible assets are measured at cost upon initial recognition. Intangible assets acquired in a business

combination are measured at fair value at the date of acquisition. Following initial recognition, intangible

assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment

whenever there is an indicator that the intangible asset may be impaired. The estimated useful life and

amortisation method are reviewed at the end of each reporting period, with the effect of any changes in

estimate being accounted for on a prospective basis. The amortisation expense on intangible assets with

finite lives is recognised in the consolidated statement of income in the expense category that is consistent

with the function of the intangible asset.

Research costs are expensed as incurred. Development expenditures on an individual project are recognised

as an intangible asset when the Group can demonstrate:

The technical feasibility of completing the intangible asset so that the asset will be available for use or

sale

Its intention to complete and its ability and intention to use or sell the asset

How the asset will generate future economic benefits

The availability of resources to complete the asset

The ability to measure reliably the expenditure during development

Amortisation of the intangible asset begins when development is complete and the asset is available for use.

It is amortised over the period of expected future benefit. Amortisation is recorded in the consolidated

statement of income. During the period of development, the asset is tested for impairment annually.

Technology and innovation expense related to product development is recorded in the consolidated

statement of income in other operating expense and expense related to process improvement is recorded in

cost of sales.

The amortisation period for intangible assets with a finite useful life is as follows:

Licenses 5 to 15 years

Trademarks 22 years

Customer lists 18 years

(Un)patented technology 10 years

Others, including in-house developed software and technology and innovation assets 3 to 5 years






28


Impairment of non-current assets

The Group assesses at each reporting date, whether there is an indication that an asset may be impaired. If

any indication exists, or when annual impairment testing is required, the Group estimates the assets'

recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU fair value less costs of

disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset

does not generate cash inflows that are largely independent of those from other assets or groups of assets.

When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset or CGU is considered

impaired and is written down to its recoverable amount.

In assessing the value in use, the estimated future cash flows are discounted to their present value using a

post-tax discount rate that reflects current market assessment of the time value of money and the risks

specific to the asset.

The Group’s impairment calculation is based on detailed budgets and forecast calculations which are

prepared separately for each of the Group’s CGU’s to which the individual assets are allocated. These budgets

and forecast calculations are generally covering a five-year period. A long-term growth rate is calculated and

applied to project future cash flows after the budget period using a terminal value.

Impairment losses of continuing operations, including impairment on working capital, if applicable, are

recognised in the consolidated statement of income in those expense categories consistent with the function

of the impaired asset.

For assets other than goodwill, an assessment is made at each reporting date to determine whether there is

an indication that previously recognised impairment losses may no longer exist or may have decreased. If

such indication exists, the Group’s estimates the asset’s or CGU’s recoverable amount. A previously

recognised impairment loss is reversed only if there has been a change in the assumptions used to determine

the asset’s recoverable amount since the last impairment loss was recognised. Such reversal is recognised in

the consolidated statement of income.

Goodwill is tested for impairment annually or when circumstances indicate that the carrying value may be

impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group

of CGU’s) to which the goodwill relates. Where the recoverable amount of the CGU is less than the carrying

amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future

years.

Financial assets

Classification of financial assets depends on the Group’s business model for managing its financial assets

and the contractual terms of the cash flows. The Group classifies its financial assets as:

financial assets measured at amortised cost or

financial assets measured at fair value

Gains or losses of assets measured at fair value will be recognised either through the consolidated statement

of income or through the consolidated statement of OCI.

Loans as well as trade receivables, which are held to collect contractual cash flows and are expected to give

rise to cash flows representing solely payments of principal and interests, are measured at amortised cost.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs

to give rise to cash flows that are Solely Payments of Principal and Interest (“SPPI”) on the principal amount

outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial

assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss,

irrespective of the business model.






29


Financial assets (continued)

Initial measurement

Financial assets are initially measured at their fair value plus transaction costs. Transaction costs of financial

assets carried at fair value through income statement are recognised in the consolidated statement of

income. Financial assets with embedded derivatives are considered in their entirety when determining

whether their cash flows meet the requirements as solely payment of principal and interest.

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in four categories:

Financial assets at amortised cost (Debt Instruments)

Financial assets at amortised cost are subsequently measured using the Effective Interest Rate (“EIR”)

method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset

is derecognised, modified or impaired.

Financial assets at ‘Fair Value through Other Comprehensive Income’ (“FVOCI”) with recycling of cumulative gains and losses (Debt Instruments)

For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and

impairment losses or reversals are recognised in the consolidated statement of income and computed in

the same manner as for financial assets measured at amortised cost. The remaining fair value changes

are recognised in OCI. Upon de-recognition, the cumulative fair value change recognised in OCI is recycled

to profit or loss.

Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon de-recognition (Equity Instruments)

SABIC measures all equity investments at fair value and presents changes in fair value of equity

investments in OCI. Dividends from such investments continue to be recognised in the consolidated

statement of income as other income when the SABIC’s right to receive payments is established. Gains

and losses on these financial assets are never recycled to the consolidated statement of income.

Financial assets at Fair Value through Income Statement (“FVIS”)

Financial assets that do not meet the criteria for subsequent recognition at amortised cost or FVOCI are

measured at FVIS. A gain or loss on a debt investment that is subsequently measured at fair value through

the income statement and which is not part of a hedging relationship is recognised and presented net in

the consolidated statement of income in the period in which it arises.

De-recognition

A financial asset or a part of a financial asset is de-recognised when:

The rights to receive cash flows from the asset have expired, or

The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to

pay the received cash flows in full without material delay to a third party under a ‘pass-through’

arrangement, and either:

a) The Group has transferred substantially all the risks and rewards of the asset; or

b) The Group has neither transferred nor retained substantially all the risks and rewards of the asset,

but has transferred control of the asset.






30


Financial assets (continued)

Impairment

Management assesses on a forward-looking basis the ECL associated with its debt instruments as part of its

financial assets, which are carried at amortised cost and FVOCI.

The ECL is based on a 12-month ECL or a lifetime ECL. The 12-month ECL results from default events on a

financial instrument that are possible within 12 months after the reporting date. When there has been a

significant increase in credit risk since initial recognition, the allowance is required for credit losses expected

over the remaining life of the exposure, irrespective of the timing of the default (the lifetime ECL).

For accounts receivables, management applies the simplified approach in calculating ECL’s. Therefore,

management does not track changes in credit risk, but instead recognised a loss allowance base on lifetime

ECL’s at each reporting date. Management has established a provision matrix that is based on its historical

credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic

environment.

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified under either of the below two classes:

Financial liabilities at FVIS and

Other financial liabilities measured at amortised cost using the EIR method.

The category of financial liability at FVIS has two sub-categories:

Designated: A financial liability that is designated by the entity as a liability at FVIS upon initial recognition;

and

Held for trading: A financial liability classified as held for trading, such as an obligation for securities

borrowed in a short sale, which have to be returned in the future. This category also includes derivative

financial instruments entered into by the Group that are not designated as hedging instruments in hedge

relationships. Separated embedded derivatives are classified as held for trading.

All financial liabilities are recognised initially when the Group becomes party to contractual provisions and

obligations under the financial instrument. The liabilities are recorded at fair value, and in the case of loans

and borrowings and payables, the proceeds received net of directly attributable transaction costs.

Subsequent measurement

Financial liabilities at FVIS continue to be recorded at fair value with changes being recorded in the


For other financial liabilities, including loans and borrowings, after initial recognition, these are subsequently

measured at amortised cost using the EIR method. Gains and losses are recognised in the consolidated

statement of income when the liabilities are de-recognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs

that are an integral part of the EIR method. The EIR amortisation is included as finance costs in the







31


Financial liabilities (continued)

Trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of financial

period which are unpaid. The amounts are unsecured and are usually paid within 30 to 60 days of recognition.

They are recognised initially at their fair value and subsequently measured at amortised cost using the EIR

method.

Financial guarantee contracts

Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The

liability is initially measured at fair value adjusted for transaction costs that are directly attributable to the

issuance of the guarantee. The fair value of financial guarantee is determined as the present value of the

difference in net cash flows between the contractual payments under the debt instrument and the payments

that would be required without the guarantee, or the estimated amount that would be payable to a third party

for assuming the obligation.

Where guarantees in relation to loans or other payables of associates are provided for no compensation, the

fair values are accounted for as contributions and recognised as part of the cost of the investment.

De-recognition

A financial liability is de-recognised when the obligation under the liability is settled or discharged. When an

existing financial liability is replaced by another from the same lender on substantially different terms, or the

terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-

recognition of the original liability and the recognition of a new liability. The difference in the respective

carrying amounts is recognised in the consolidated statement of income.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is disclosed in the consolidated

statement of financial position if there is a currently enforceable legal right to offset recognised amounts and

there is an intention to settle on a net basis or to realise the assets and settle the liabilities simultaneously.

Derivative financial instruments and hedge accounting

Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract

is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when

the fair value is positive and as financial liabilities when the fair value is negative. Any gains or losses arising

from changes in fair value on derivatives during the period that do not qualify for hedge accounting and the

ineffective portion of an effective hedge, are taken directly to the consolidated statement of income.

The fair value of forward currency contracts is the difference between the forward exchange rate and the

contract rate. The forward exchange rate is referenced to current forward exchange rates for contracts with

similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to yield

curves for similar instruments.

Inventories

Inventories, including raw materials, work in progress, finished goods, and consumables and spare parts are

measured at the lower of cost i.e. historical purchase prices based on the weighted average principle plus

directly attributable costs or the net realisable value. Inventories of work in progress and finished goods

include cost of materials, labour and an appropriate proportion of direct overheads.






32


Cash dividend paid to equity holders of the Parent

The Group recognises a liability to make cash distribution to equity holders of the Parent when the distribution

is authorised and the distribution is no longer at the discretion of the Group. In accordance with the

Companies Law in KSA, a distribution is authorised when it is approved by the shareholders. Interim

dividends, if any, are recorded when approved by the Board of Directors. A corresponding amount is

recognised directly in the consolidated statement of changes in equity.

Provisions

General

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past

event, it is probable that an outflow of resources embodying economic benefits will be required to settle the

obligation and a reliable estimate can be made of the obligation amount. If the effect of the time value of

money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the

risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of

time is recognised as finance cost.

Environmental obligations

In accordance with the Group’s environmental policy and applicable legal requirements, the Group recognises

a provision for environmental clean-up cost when it is probable that a legal or constructive liability has

materialised and the amount of cash outflow can be reasonably estimated.

Onerous contracts

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from

a contract are lower than the unavoidable cost meeting its obligation under the contract.

De-commissioning liability

The Group records a provision for de-commissioning costs of manufacturing facilities when an obligation

exists. De-commissioning costs are provided at the present value of expected costs to settle the obligation

using estimated cash flows and are recognised as part of the cost of the particular asset. The cash flows are

discounted at a current pre-tax rate that reflects the risks specific to the de-commissioning liability. The

unwinding of the discount is expensed as incurred and recognised in the consolidated statement of income

as a finance cost. The estimated future cost of de-commissioning is reviewed annually and adjusted as

appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted

from the cost of the asset.

Employee benefits

Long-term employee benefit obligations

Long-term employee benefit obligations are measured at the present value of expected future payments to

be made in respect of services provided by employees up to the end of the reporting period using the

projected unit credit method and recorded as non-current liabilities. Consideration is given to expected future

salary increase and historic attrition rates. Expected future payments are discounted using market yields at

the end of the reporting period of high-quality corporate or government bonds with terms and currencies that

match, as closely as possible, the estimated future cash outflows. Re-measurements as a result of changes in

actuarial assumptions are recognised in the consolidated statement of comprehensive income. The Group

offers various post-employment schemes, including both defined contribution and defined benefit plans, and

post-employment medical and life insurance plans for eligible employees and their dependents.






33


Employee benefits (continued)

Long-term employee benefit obligations (continued)

Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions

into a separate entity and has no other legal or constructive obligation. The contributions are recognised as

employee benefit expense in the consolidated statement of income when they are due.

Within KSA, the Group offers a saving plan to encourage its Saudi employees to make savings in a manner

that will warrant an increase in their income and contribute to securing their future according to the

established plan. The saving contributions from the participants are deposited in a separate bank account

other than the Group’s normal operating bank accounts (but not in any separate legal entity). This cash is a

restricted balance, and for the purpose of presentation in the financial statements, it is offset with the related

liability under the savings plan and the net liability to employees is reported under the employee benefits

liability.

Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group

primarily has end of service benefits, defined benefit pension plans and post-retirement medical and life

insurance plans, which qualify as defined benefit plans.

End of service benefits and pension plans

In KSA, for the liability for employees’ end of service benefits, the actuarial valuation process takes into

consideration the provisions of the Saudi Arabian Labour and Workmen Law as well as the Group’s policy. In

other countries, the respective labour laws are taken into consideration.

The net pension asset or liability recognised in the consolidated statement of financial position in respect of

defined benefit post-employment plans is the present value of the projected Defined Benefits Obligation

(“DBO”) less the fair value of plan assets, if any, at the reporting date.

DBO is re-measured on a periodic basis by independent actuaries using the projected unit credit method. The

present value of the DBO is determined by discounting the estimated future cash outflows using interest rates

of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and

that have terms approximating to the terms of the related obligation. In countries where there is no deep

market in such bonds, the market rates on government bonds are used. The net interest cost are calculated

by applying the discount rate to the net balance of the DBO and the fair value of plan assets.

Service costs are calculated, using the actuarially determined pension cost rate at the end of the prior year,

adjusted for significant market fluctuations and for any significant one-off events, such as plan amendments,

curtailments and settlements. In the absence of such significant market fluctuations and one-off events, the

actuarial liabilities are rolled forward based on the assumptions as at the beginning of the year. If there are

significant changes to the assumptions or arrangements during the interim period, consideration is given to

re-measure such liabilities and the related costs.

Re-measurement gains and losses arising from changes in actuarial assumptions are recognised in the period

in which they occur in OCI. Changes in the present value of the DBO resulting from plan amendments or

curtailments are recognised immediately in the consolidated statement of income as past service costs.

When the benefits plan are amended, the portion of the change in benefit relating to the past service by

employees is recognised as an expense or income; if applicable, on a straight-line basis over the average

period until the benefits become vested in the consolidated statement of income. To the extent that benefits

vest immediately, the expense or income, if applicable is recognised immediately in the consolidated

statement of income.






34


Employee benefits (continued)

Long-term employee benefit obligations (continued)

End of service benefits and pension plans (continued)

Current and past service costs related to post-employment benefits are recognised immediately in the

consolidated statement of income while unwinding of the liability at discount rates used are recorded as

financial cost. Any changes in net liability due to actuarial valuations and changes in assumptions are taken

as re-measurement in OCI.

Employee Home Ownership Program (“HOP”)

Certain companies within the Group have established employee’s HOP that offer eligible employees the

opportunity to buy residential units constructed by these subsidiaries through a series of payments over a

particular number of years. Ownership of the houses is transferred upon completion of full payment.

Under the HOP, the amounts paid by the employee towards the house are repayable back to the employee in

case the employee discontinues employment and the house is returned back to the Group. HOP is recognised

as a non-current prepayment asset at time the residential units are allocated to the employees and are

amortised over the repayment period of the facility due from employees.

Employee Home Loan Program (“HLP”)

The Group provides interest free home loan to its eligible employees for purposes related to purchase or

building of a house or apartment. The loan is repaid in monthly instalment by deduction of employee’s pay.

HLP is recognised as a non-current financial asset at fair value and measured at amortised cost using the EIR

method. The difference between the fair value and the actual amount of cash given to the employee is

recognised as a “non-current prepaid employee benefit” and is amortised as an expense equally over the

period of service. The same amount is also amortised as finance income against the receivable from

employees.

Revenue recognition

Sales revenue

The Group recognises revenue when control of the products sold, transfers to the customer, which shall be

considered in the context of a five-step approach and applying the applicable shipping terms.

Revenue is measured at the fair value of the consideration received or receivable, taking into account

contractually defined terms of payment and excluding taxes or duty. Revenue arrangements are assessed

against specific criteria to determine whether the Group is acting as a principal or agent.

Rights of return

When a contract with a customer provides a right of return of the good within a specified period, the Group

accounts for the right of return when requested by the customer and contractual conditions are met.

Allocation of performance obligations

In certain instances, the Group determines delivery services as separately identifiable and distinct from the

sale of goods. These are when the Group transfers control of goods at the Group’s loading site and provides

delivery services to the buyer’s site. The Group allocates a portion of the total transaction price to delivery

services based on a best estimate of a similar stand-alone service.






35


Revenue recognition (continued)

Variable pricing – preliminary pricing

Certain products in certain markets may be sold with variable pricing arrangements. Such arrangements

determine that a preliminary price is charged to the customer at the time of transfer of control of the products

while the final price for the products can only be determined by reference to a time period ending after that

time. In such cases, and irrespective of the formula used for determining preliminary and final prices, revenue

is recorded at the time of transfer of control of the products at an amount representing the expected final

amount of consideration that the Group receives.

Where the Group records an ‘accounts receivable’ for the preliminary price, subsequent changes in the

estimated final price shall not be recorded as revenue until such point in time at which the actual final price is

determined (as long as these changes result from changes in the market price/market price index of the

products). They may however be considered in subsequent re-measurement as a financial asset at fair value.

Such re-measurement may be recorded as a separate revenue.

All other updates to the preliminary price is recorded against revenue with the additional receivable amount

recorded under a contract asset or contract liability. Such contract asset or liability is de-recognised against

an accounts receivable at the point in time at which the actual final price is determined.

Variable pricing – volume rebates

The Group provides retrospective volume rebates to its customers on products purchased by the customer

once the quantity of products purchased during the period exceeds a threshold specified in the contract. The

Group estimates the expected volume rebates using a prudent assessment of the expected amount of

rebates, reviewed and updated on a regular basis. These amounts will subsequently be repaid in cash to the

customer or are offset against amounts payable by the customer, if allowed by the contract.

Volume rebates give rise to variable consideration. The Group considers the “most likely amount” method to

be the best estimate of this variable consideration.

Rendering of services

In certain instances, the Group provides logistic services for goods sold. This service is satisfied over the

period of delivery. Consequently, the Group defers revenue allocated to the logistic services and recognise it

over that period.

Finance income

For all financial instruments measured at amortised cost and interest-bearing financial assets classified as

investments in equity instruments at FVOCI, finance income is recorded using the EIR. EIR is the rate that

discounts the estimated future cash payments or receipts over the expected life of the financial instrument or

a shorter period, where appropriate, to the net carrying amount of the financial asset or liability.






36

7 Property, plant and equipment


Land and

buildings

Plant and

equipment

Furniture and

fixtures Vehicles Finance lease

Assets under

construction Total

Cost:

At the beginning of the year 32,568,001 294,428,552 1,046,979 745,682 1,326,263 20,267,943 350,383,420

Additions 341,811 3,247,301 11,250 14,859 - 16,003,141 19,618,362

Transfers (Note 8) 354,226 8,101,015 39,553 3,279 (1,326,263) (8,436,525) (1,264,715)

Other transfers (i) - - - - - (1,567,961) (1,567,961)

Write-offs (110) (750,129) (1,617) (46,084) - (179,383) (977,323)

Disposals (175,560) (2,757,053) (18,494) (7,637) - - (2,958,744)

Currency translation (105,025) (123,467) (3,699) (304) - (3,044) (235,539)

At the end of the year 32,983,343 302,146,219 1,073,972 709,795 - 26,084,171 362,997,500 Accumulated depreciation and impairment:

At the beginning of the year (15,616,034) (168,831,092) (792,790) (579,320) (709,901) (34,599) (186,563,736)

Charge for the year (1,028,799) (13,324,266) (63,532) (36,684) - - (14,453,281)

Transfers (Note 8) 115,010 (111,383) (1,881) 1,878 709,901 7,092 720,617

Impairment (107,106) (2,835,521) (1,323) - - (402,208) (3,346,158)

Write-offs 48 606,532 1,617 46,084 - - 654,281

Disposals 170,752 2,651,288 18,315 7,581 - - 2,847,936

Currency translation 51,932 78,184 2,813 196 - - 133,125

At the end of the year (16,414,197) (181,766,258) (836,781) (560,265) - (429,715) (200,007,216)

Net book value:

At 31 December 2019 16,569,146 120,379,961 237,191 149,530 - 25,654,456 162,990,284

At 1 January 2019 16,951,967 125,597,460 254,189 166,362 616,362 20,233,344 163,819,684

(i) Includes transfers of housing units constructed for employees to other non-current assets






37

7 Property, plant and equipment (continued)


Land and

buildings

Plant and

equipment

Furniture and

fixtures Vehicles Finance lease

Assets under

construction Total

Cost:

At the beginning of the year 31,853,024 281,502,829 1,016,897 755,245 1,217,233 24,894,448 341,239,676

Additions 207,171 2,090,600 17,238 16,655 29,858 11,812,453 14,173,975

Transfers (i) 975,707 13,426,401 39,453 4,659 79,795 (16,235,952) (1,709,937)

Disposals (165,221) (985,644) (14,111) (29,584) (578) (146,612) (1,341,750)

Currency translation (302,680) (1,605,634) (12,498) (1,293) (45) (56,394) (1,978,544)

At the end of the year 32,568,001 294,428,552 1,046,979 745,682 1,326,263 20,267,943 350,383,420

Accumulated depreciation and impairment:

At the beginning of the year (14,807,964) (156,161,828) (754,507) (554,027) (633,818) (971,621) (173,883,765)

Charge for the year (1,054,903) (13,230,628) (64,986) (45,421) (76,499) - (14,472,437)

Transfers (22,193) (1,046,616) 5,853 (48) - 937,022 (125,982)

Impairment - (303,750) - - - - (303,750)

Disposals 143,179 936,681 12,388 20,620 577 - 1,113,445

Currency translation 125,847 975,049 8,462 (444) (161) - 1,108,753

At the end of the year (15,616,034) (168,831,092) (792,790) (579,320) (709,901) (34,599) (186,563,736) Net book value:

At 31 December 2018 16,951,967 125,597,460 254,189 166,362 616,362 20,233,344 163,819,684

At 1 January 2018 17,045,060 125,341,001 262,390 201,218 583,415 23,922,827 167,355,911

(i) Includes transfers within property, plant and equipment and transfer of housing units constructed for employees to other non-current assets.




For the year end 31 December 2019


38

7 Property, plant and equipment (continued)

Allocation of depreciation charge for the year

For the year ended

31 December 2019

For the year ended

31 December 2018

Cost of sales 13,743,118 13,903,349

General and administrative expenses 651,524 509,351

Selling and distribution expenses 58,639 59,737

14,453,281 14,472,437

Land and building

The land on which plant and related facilities of certain subsidiaries in KSA are constructed are leased from

the Royal Commission for Jubail and Yanbu under renewable lease agreements for a period up to 30 years.

The Group has similar kind of arrangements and terms for some sites in Europe.

Land and buildings include an amount of SR 2.04 billion as of 31 December 2019 (2018: SR 2.04 billion)

representing the cost of freehold land.

Assets under construction

Assets under construction mainly represents the expansion of existing plants and new projects being

executed by certain affiliates. The related capital commitments are reported in Note 38.

Capitalised borrowing costs

The borrowing cost capitalised during the year ended 31 December 2019 amounted to SR 3.03 million (2018:

SR 38.72 million), out of which SR 3.03 million (2018: SR 15.15 million) relate to non-conventional facilities. The

Group uses the capitalisation rate of 4% (2018: 4%) to determine the amount of borrowing costs eligible for

capitalisation.

Pledged property, plant and equipment

Property, plant and equipment of certain subsidiaries in the KSA are pledged to the Saudi Industrial

Development Fund (“SIDF”) as security for its term loans amounting to SR 30.42 billion (2018: SR 34.62

billion).

Certain leased assets are pledged as security for the related lease and hire liabilities.

Impairment and write-offs of plant and equipment

During the year ended 31 December 2019, impairment and write-offs, amounting to SR 3.67 billion (2018:

SR 0.30 billion), was recorded against plant and equipment, mainly for Petrochemicals SBU assets, which

are or will be taken out of production. These were mostly recognised in the below two subsidiaries:

Arabian Industrial Fibers Company (“Ibn Rushd”), where due to a changing market environment, the

company revised its business model leading to the closure of certain assets in the course of 2020. An

impairment loss was recognised in the consolidated statement of income as part of cost of sales,

amounting to SR 2.7 billion.

Saudi Methanol Company (“Ar-Razi”) has idled a plant from its production portfolio as of 1 January 2020,

as it no longer meets certain governmental regulations anymore. The book value of this plant and

capitalized spare parts amounting to SR 246 million has been written-off and recognised in the

consolidated statement of income as other expenses.






39

8 Right of use assets


Land and buildings

Plant and

equipment Storage and tanks

Vessels and

Vehicles Total

Cost:

At the beginning of the year - - - - -

IFRS 16 adoption (Note 4) 4,017,817 149,237 1,024,249 2,103,994 7,295,297

Transfers from property, plant and equipment at transition 45,752 1,213,819 - 5,144 1,264,715

Additions 429,550 258,912 10,454 427,504 1,126,420

Re-measurement (144,657) (10,472) (4,535) (84,578) (244,242)

Currency translation adjustment (12,731) (2,384) (13,238) (19,116) (47,469)

At the end of the year 4,335,731 1,609,112 1,016,930 2,432,948 9,394,721

Accumulated depreciation:

At the beginning of the year - - - - -

Charge for the year (600,397) (187,923) (217,976) (597,409) (1,603,705)

Transfers (20,589) (697,936) - (2,092) (720,617)

Re-measurement (2,449) - (3,446) 209 (5,686)

Currency translation adjustment 182 1,168 (72) (26) 1,252

At the end of the year (623,253) (884,691) (221,494) (599,318) (2,328,756)

Net book value:

At 31 December 2019 3,712,478 724,421 795,436 1,833,630 7,065,965

Allocation of depreciation charge for the year

For the year ended

31 December 2019

Cost of sales 1,172,418

General and administrative expenses 376,286

Selling and distribution expenses 55,001

1,603,705






40

9 Intangible assets


Goodwill

Software and IT

development Licenses Others (i)

Intangibles under

development Total

Cost:

At the beginning of the year 8,743,895 2,153,448 10,181,769 54,254 3,045 21,136,411

Additions - 3,595 94,335 - 138,896 236,826

Transfers - 52,455 108,671 (476) - 160,650

Write-offs - (41,515) (16,977) (3,302) - (61,794)

Currency translation adjustment (105,378) (7,084) (20,098) (1,009) - (133,569)

At the end of the year 8,638,517 2,160,899 10,347,700 49,467 141,941 21,338,524

Accumulated amortisation:

At the beginning of the year - (1,631,010) (6,545,451) (12,739) - (8,189,200)

Charge for the year - (188,054) (463,865) (760) - (652,679)

Impairment and write-offs - 41,359 (189,340) 3,302 - (144,679)

Currency translation adjustment - 4,531 20,978 138 - 25,647

At the end of the year - (1,773,174) (7,177,678) (10,059) - (8,960,911)

Net book value:

At 31 December 2019 8,638,517 387,725 3,170,022 39,408 141,941 12,377,613

At 1 January 2019 8,743,895 522,438 3,636,318 41,515 3,045 12,947,211






41

9 Intangible assets (continued)


Goodwill

Software and IT

development Licenses Others (i)

Intangibles under

development Total

Cost:

At the beginning of the year 9,089,745 2,328,153 9,906,856 105,741 32,950 21,463,445

Additions - 1,310 65,611 1,092 3,045 71,058

Additions – through business combination

(Note 10) - - 201,668 - - 201,668

Transfers - 44,376 65,514 (49,145) (28,903) 31,842

Write-offs (97,500) (202,867) (649) (836) (4,047) (305,899)

Currency translation adjustment (248,350) (17,524) (57,231) (2,598) - (325,703)

At the end of the year 8,743,895 2,153,448 10,181,769 54,254 3,045 21,136,411

Accumulated amortisation:

At the beginning of the year - (1,651,660) (6,215,522) (53,866) - (7,921,048)

Charge for the year - (192,560) (471,084) - - (663,644)

Transfers - - 101,862 - - 101,862

Write-offs - 202,867 649 40,649 - 244,165

Currency translation adjustment - 10,343 38,644 478 - 49,465

At the end of the year - (1,631,010) (6,545,451) (12,739) - (8,189,200)

Net book value:

At 31 December 2018 8,743,895 522,438 3,636,318 41,515 3,045 12,947,211

At 1 January 2018 9,089,745 676,493 3,691,334 51,875 32,950 13,542,397

(i) Others includes trademarks, customer lists, (un)patented technology, in-house developed software and technology and innovation assets.






42

9 Intangible assets (continued)

Allocation of amortisation charge for the year

For the year ended

31 December 2019

For the year ended

31 December 2018

Cost of sales 231,394 229,576

General and administrative expenses 416,318 431,885

Selling and distribution expenses 4,967 2,183

652,679 663,644

Goodwill

Goodwill, resulting from the Group’s acquisitions in 2002 and 2007, has been allocated to the Group’s SBUs

that represent its CGUs at which the goodwill is managed. For goodwill impairment testing, these CGUs are

Petrochemicals and Specialties. The goodwill allocated to Petrochemicals amounts to SR 5.82 billion and for

Specialties to SR 2.82 billion. The Weighted Average Cost of Capital (“WACC”) rate applied at Group’s level

is 8.0% for Petrochemicals (2018: 7.1%) and for Specialties 8.2% (2018: 7.7%).

The WACC is calculated based on long-term moving monthly average assumptions that reflect market

assessments of the risk specific to each CGU. Segment specific risk is incorporated by applying average beta

factors. The beta factors are evaluated annually based on publicly available market data of SABIC’s peers.

The average effective tax rate is assumed to be 21%-23% (2018: 23%-25%). The cash flow projections are

derived from the respective business plans. Cash flow projections beyond the five year business plan are

extrapolated taking into account an assumed growth rate of 0.8%-2.0% (2018: 1.1%- 2.0%).

For 2019, no impairment was recognised (2018: SR 0.098 billion which was determined based on the fair

value less cost of disposal).

With respect to the assessment of the value in use, management believes that a reasonably possible change

in its used assumptions would not cause the carrying value of its goodwill to exceed its recoverable amount.






43

10 Investments in associates and joint ventures

The table below outlines the Group’s investment in associates and joint venture companies:

Name of associates and joint ventures Ownership

%

Place of business /

country of incorporation Nature of activities 31 December 2019

31 December 2018

Associate:

Gulf Petrochemical Industries Company (“GPIC”) 33.33 Bahrain Petrochemical 657,748 697,515

Ma’aden Phosphate Company (“MPC”) 30.00 KSA Agri-nutrients 2,130,182 2,125,868

Power and Water Utilities Company for Jubail and Yanbu

(“MARAFIQ”) 24.81 KSA

Utilities 1,727,310 1,696,036

Aluminium Bahrain BSC (“ALBA”) 20.62 Bahrain Aluminium 2,214,895 2,227,253

National Chemical Carrier Company (“NCC”) 20.00 KSA Transportation 310,015 301,975

Ma’aden Wa’ad Al Shamal Phosphate Company (“MWSPC”) 15.00 KSA Agri-nutrients 1,665,245 1,876,238

Saudi Arabian Industrial Investment Company (“Dussur”) 25.00 KSA Investments 372,762 115,706

Clariant AG (“Clariant”) (Note 10.1) 24.99 Switzerland Specialty chemical 8,685,005 10,550,156

Joint venture:

Sinopec Sabic Tianjin Petrochemical Company (“SSTPC”) 50.00 China Petrochemical 4,212,360 4,770,486

Sabic SK Nexlene Company (“SSNC”) 50.00 Singapore Petrochemical 495,189 544,729

Others - - 879,683 874,588

23,350,394 25,780,550






44

10 Investments in associates and joint ventures (continued)

10.1 Investment in Clariant A.G.

At 10 September 2018, SABIC acquired approximately 83 million shares equivalent to 24.99% ownership in

Clariant, a global specialty chemical company listed at the Swiss Stock Exchange (“SIX”). As major

stakeholder, management considers having significant influence, without having control over Clariant.

Therefore, this investment is accounted for as an associate using the equity method.

The Group paid a consideration of SR 10.82 billion, which includes goodwill amounting to SR 5.38 billion.

On 18 September 2018, SABIC and Clariant announced their long-term strategic relationship. On 25 July 2019,

Clariant and SABIC announced that the negotiations for this potential strategic initiative was deferred due

to market circumstances. Subsequently, Clariant announced their decision to divest their Masterbatches BU

and recognised a significant provision related to a price competition investigation within the European

Union. All these events had a significant negative influence on Clariant’s listed share price. Since the

acquisition, the fair value of Clariant shares decreased, with the lowest quotation since SABIC acquired the

shares, on 15 August 2019 at a closing rate of CHF 17.09 per share.

During 2019, management reassessed the carrying value of its investment in Clariant comparing the higher

of fair value less cost of disposal and value in use approach. This assessment is based on publicly available

information and average analyst consensus regarding the development of the 12-month forecast of the

Clariant share price, including a reasonable premium given the fact that SABIC has significant influence on

this investment through its 24.99% share. As a result, the Group recorded an impairment provision of

SR 1.52 billion.






45


The movement of investments in associate and joint venture is as follows:


Associates Joint ventures

Others Total GPIC MPC MARAFIQ ALBA NCC MWSPC Dussur Clariant SSTPC SSNC

Balance at the beginning

of the year 697,515 2,125,868 1,696,036 2,227,253 301,975 1,876,238 115,706 10,550,156 4,770,486 544,729 874,588 25,780,550

Capital contribution - - - - - - 283,092 - - - 55,179 338,271

Share of results (i) 38,955 4,744 45,594 (12,358) 7,933 (210,999) (26,036) (233,617) 447,902 (19,147) (123,320) (80,349)

Impairment - - - - - - - (1,515,000) - - - (1,515,000)

38,955 4,744 45,594 (12,358) 7,933 (210,999) (26,036) (1,748,617) 447,902 (19,147) (123,320) (1,595,349)

Movements in OCI (33,722) (430) 11,881 - 107 6 - 54,588 (27,984) (30,393) - (25,947)

Dividends received (45,000) - (26,201) - - - - (171,122) (929,142) - - (1,171,465)

Others - - - - - - - - (48,902) - (ii) 73,236 24,334

Balance at the end of the

year 657,748 2,130,182 1,727,310 2,214,895 310,015 1,665,245 372,762 8,685,005 4,212,360 495,189 879,683 23,350,394

(i) The Group’s share of results in associates’ net income recorded after fair value adjustments and changes in estimated results.

(ii) Share of results on the face of the statement of income includes losses of SR 61 million (2018: nil) related to entities under liquidation for which previous losses

were recognised up to the investment value.






46



Associates Joint ventures

Others Total GPIC GARMCO MPC MARAFIQ ALBA NCC MWSPC Dussur Clariant (i) SSTPC SSNC

Balance at the beginning

of the year 628,503 83,059 1,960,276 1,719,222 2,152,435 331,604 1,799,877 144,687 - 4,031,268 583,084 870,125 14,304,140

Capital contribution - - - - - - - - 10,822,077 190,475 - 132,683 11,145,235

Share of results 106,803 (83,026) 163,160 (7,977) 150,543 (29,677) 77,169 (28,905) (106,973) 831,728 1,297 (24,292) 1,049,850

Movements in OCI (291) (33) 2,432 20,185 - 48 (808) (76) (164,948) 236,920 (39,652) - 53,777

Dividends received (37,500) - - (35,394) (75,725) - - - - (504,217) - - (652,836)

Others - - - - - - - - - (15,688) - (ii) (103,928) (119,616)

Balance at the end of the

year 697,515 - 2,125,868 1,696,036 2,227,253 301,975 1,876,238 115,706 10,550,156 4,770,486 544,729 874,588 25,780,550

(i) The Group’s share in losses of Clariant’s net income over the period from 10 September 2018 until year-end are recorded after fair value adjustments.

(ii) Others include obtaining control of Black Diamond Structures, LLC as well as other movements in joint ventures.






47


Summarised financial information of associates

The tables below provide summarised financial information of the material associates of the Group. The

information disclosed reflects the amounts presented in the available financial statements of the relevant

investee and not SABIC’s share of those amounts.

As at 31 December 2019

MPC MARAFIQ ALBA MWSPC (i) Clariant (ii)

Current assets 3,060,914 2,420,667 4,555,338 2,238,704 15,598,896

Non-current assets 14,237,395 19,602,573 19,520,054 26,493,219 28,379,978

Current liabilities 1,792,801 1,967,942 4,544,922 2,497,633 10,467,834

Non-current liabilities 8,404,900 13,093,147 8,788,981 18,599,326 14,221,039

Net assets 7,100,608 6,962,151 10,741,489 7,634,964 19,290,001

Reconciliation:

Group’s share in % 30.00% 24.81% 20.62% 15.00% 24.99%

Group’s share in associate 2,130,182 1,727,310 2,214,895 1,145,245 4,820,571

Intangible / goodwill - - - 520,000 5,379,434

Impairment provision - - - - (1,515,000)

Carrying amount 2,130,182 1,727,310 2,214,895 1,665,245 8,685,005


Revenue 4,131,423 3,852,630 10,241,576 3,454,285 16,866,641

Net income (loss) for the year - all

from continuing operations 15,814 246,245 53,569 (1,244,981)

(130,363)

Reconciliation:

Group’s share in % 30.00% 24.81% 20.62% 15.00% 24.99%

Group’s share in associate 4,744 61,093 11,046 (186,747) (32,578)

Share in earnings (losses) 4,744 45,594 (12,358) (210,999) (1,748,617)

(i) The Group’s investment in MWSPC includes additional contribution made to one of the shareholders in

relation to mineral rights.

(ii) The Group’s investments in Clariant is recorded after fair value adjustments.






48


Summarised financial information of associates (continued)


MPC MARAFIQ ALBA MWSPC (i) Clariant (ii)

Current assets 2,837,269 3,349,284 4,507,876 3,763,582 12,727,365

Non-current assets 14,624,827 19,186,046 17,034,081 27,180,114 31,803,920

Current liabilities 1,547,546 2,959,695 4,204,279 2,330,057 8,770,556

Non-current liabilities 8,828,324 12,739,537 6,536,255 19,705,388 14,746,700

Net assets 7,086,226 6,836,098 10,801,423 8,908,251 21,014,029

Reconciliation:

Group’s share in % 30.00% 24.81% 20.62% 15.00% 24.99%

Group’s share in associate 2,125,868 1,696,036 2,227,253 1,336,238 5,251,406

Intangible / goodwill - - - 540,000 5,298,750

Carrying amount 2,125,868 1,696,036 2,227,253 1,876,238 10,550,156


Revenue 5,215,648 4,053,837 9,075,806 1,163,825 25,393,900

Net income for the year - all from

continuing operations 705,082 228,214 594,270 415,816 1,364,975

Reconciliation:

Group’s share in % 30.00% 24.81% 20.62% 15.00% 24.99%

Group’s share in associate 211,525 56,620 122,538 62,372 341,107

Share in earnings (losses) 163,160 (7,977) 150,543 77,169 (106,973)

Notes:

(i) The Group’s investment in MWSPC includes additional contribution made to one of the shareholders in

relation to mineral rights.

(ii) The Group’s share in losses of Clariant’s net income over the period from 10 September 2018 until year-

end are recorded after fair value adjustments.






49


Summarised financial information of joint ventures

The tables below provide the summarised financial information of SSTPC, a material joint venture of

the Group. The information disclosed reflects the amounts presented in the financial statements of the

joint venture and not SABIC’s share of those amounts.

As at

31 December 2019

As at

31 December 2018

Cash and bank balances 1,740,156 2,778,440

Total current assets 4,156,010 4,956,637

Non-current assets 8,753,735 8,384,204

Current financial liabilities (excluding trade payables) 799,634 785,666

Total current liabilities 1,822,727 1,634,680

Total non-current liabilities 2,662,298 2,165,189

Net assets 8,424,720 9,540,972

Reconciliation:

Group’s share in % 50.00% 50.00%

Group’s share in joint venture 4,212,360 4,770,486

Carrying amount 4,212,360 4,770,486

For the year ended

31 December 2019

For the year ended

31 December 2018

Revenue 8,554,640 10,334,966

Depreciation and amortisation 594,167 483,784

Interest income 93,061 94,355

Interest expense (72,547) (95,467)

Income tax expense (289,345) (559,773)

Net income for the year - all from continuing operations 895,804 1,663,456

Reconciliation:

Group’s share in % 50.00% 50.00%

Group’s share of earnings in joint venture 447,902 831,728

Share of earnings 447,902 831,728






50


Summarised financial information of individually immaterial associates and joint venture

For the year ended 31 December 2019 For the year ended 31 December 2018

Individually

immaterial

associates

Individually

immaterial joint

ventures

Individually

immaterial

associates

Individually

immaterial joint

ventures

Net income (loss) for

the year - all from

continuing operations 220,857

(38,293)

556,571

20,013

Fair value of listed associates

The fair value of the Group’s investment in ALBA and Clariant based on its trading price at 31 December 2019

is SR 1.22 billion and SR 6.94 billion (Note 10.1) respectively (2018: SR 1.75 billion and SR 5.72 billion).

11 Investments in debt instruments

31 December 2019 31 December 2018

Current (in short-term investments –Note 18)

Fixed rate instruments 562,366 93,750

Floating rate instrument 524,080 481,460

1,086,446 575,210

Non-current

Fixed rate instruments 591,920 1,146,865

Floating rate instrument 753,672 1,347,015

1,345,592 2,493,880

2,432,038 3,069,090

Currency exposure


SR 1,664,667 1,641,779

USD 767,371 1,427,311

2,432,038 3,069,090






51

12 Investments in equity instruments

Carrying value of the investments in equity instruments are as follows:


Unlisted securities

Equity securities 732,868 784,815

Mutual fund units 313,141 305,294

1,046,009 1,090,109

13 Other non-current assets


Employee advances 4,050,066 3,585,847

Receivables from Japan Saudi Arabia Methanol Company, Inc.

(“JSMC”) (Note 22) 1,606,049 -

Loan receivable from related parties 96,075 620,029

Pre-paid mining fee 112,500 112,500

Others 652,379 808,080

6,517,069 5,126,456

Employee advances

Employee advances represents receivables from employees related to HOP and other benefits.

Loan receivable from related parties

Loans receivable from related parties relates to certain associates and joint ventures at normal market rates.

Others

Others mainly include advances to contractors and miscellaneous items






52

14 Financial assets and financial liabilities

31 December 2019

Notes Total

Financial assets

/ liabilities at

amortised cost

Financial assets

/ liabilities at

FVIS

Financial

assets at

FVOCI Fair value (ii) Level I Level II Level III

Financial assets

Investments in debt instruments

- Fixed 11 1,154,286 1,154,286 - - 1,405,304 - 1,405,304 -

- Floating 11 1,277,752 894,960 382,792 - 1,290,835 - 1,290,835 -

Unquoted equity instruments 12 1,046,009 - 320,807 725,202 1,046,009 - 783,355 262,654

Trade receivables 16 18,322,552 18,322,552 - - N/A - - -

Short-term investments

- Time deposits 18 4,379,820 4,379,820 - - N/A - - -

- Other short-term investments 18 92,288 - 92,288 - 92,288 92,288 - -

Cash and bank balances

- Cash and bank balances 19 10,019,848 10,019,848 - - N/A - - -

- Time deposits 19 28,292,927 28,292,927 - - N/A - - -

Other financial assets (i) 3,104,355 3,104,355 - - N/A - - -

67,689,837 66,168,748 795,887 725,202 3,834,436 92,288 3,479,494 262,654


Debt 23 42,696,650 42,696,650 - - 44,088,567 - 44,088,567 -

Lease liabilities (iii) 23 7,038,906 7,038,906 N/A N/A N/A - - -

Trade payables 25 12,888,175 12,888,175 - - N/A - - -

Other financial liabilities (i) 2,191,103 2,191,103 - - N/A - - -

64,814,834 64,814,834 - - 44,088,567 - 44,088,567 -

(i) Other financial assets include lease receivables, loans to related parties and interest receivables. Other financial liabilities include dividend payable, payables to related parties and interest payables.

(ii) The Group assessed that trade receivables, short-term investments, cash and bank balances, trade payables and other financial assets and liabilities approximate their carrying amounts largely due to the short-term

maturities of these instruments.

(iii) Lease liabilities are recognised according to IFRS 16. In accordance with IFRS 7.29(d), disclosures on the fair value of lease liabilities are not required.






53

14 Financial assets and financial liabilities (continued)

31 December 2018

Notes Total

Financial

assets /

liabilities at

amortised cost

Financial

assets /

liabilities at

FVIS

Financial

assets at

FVOCI Fair value (ii) Level I Level II Level III

Financial assets

Investments in debt instruments

- Fixed 11 1,240,615 1,240,615 - - 1,720,920 - 1,720,920 -

- Floating 11 1,828,475 1,441,498 386,977 - 1,692,752 - 1,692,752 -

Investments in equity instruments

- Unquoted 12 1,090,109 - 317,669 772,440 1,090,109 - 907,343 182,766

Derivative financial assets 27 29,651 - 29,651 - 29,651 - 29,651 -

Trade receivables 16 21,821,849 21,821,849 - - N/A - - -

Short-term investments

- Time deposits 18 9,240,289 9,240,289 - - N/A - - -

Cash and bank balances - - -

- Cash and bank balances 19 13,153,210 13,153,210 - - N/A

- Time deposits 19 29,437,610 29,437,610 - - N/A - - -

Other financial assets (i) 1,780,085 1,780,085 - - N/A - - -

79,621,893 78,115,156 734,297 772,440 4,533,432 - 4,350,666 182,766


Debt 23 46,524,316 46,524,316 - - 45,715,403 - 45,715,403 -

Finance lease liabilities 23 738,925 738,925 N/A N/A N/A - - -

Derivative financial liabilities 27 381 - 381 - 381 - 381 -

Trade payables 25 14,969,357 14,969,357 - - N/A - - -

Other financial liabilities (i) 3,357,882 3,357,882 - - N/A - - -

65,590,861 65,590,480 381 - 45,715,784 - 45,715,784 -

(i) Other financial assets include lease receivables, loans to related parties and interest receivables. Other financial liabilities include dividend payable, payables to related parties and interest payables.

(ii) The Group assessed that trade receivables, short-term investments, cash and bank balances, trade payables and other financial assets and liabilities approximate their carrying amounts largely due to the

short-term maturities of these instruments.






54


The Group's exposure to various risks associated with the financial instruments is discussed in Note 37. The

maximum exposure to credit risk at the end of the reporting year is the carrying amount of each class of

financial assets mentioned above.

There were no transfers between the levels during the year ended 31 December 2019 and 2018.

The following methods and assumptions were used to estimate the fair values:

Long-term fixed-rate and variable-rate receivables and borrowings are evaluated by the Group based

on parameters such as interest rates, specific country risk factors and individual creditworthiness of the

customer and the risk characteristics of the financed project. Based on this evaluation, allowances are

taken into account for the expected losses of these receivables and borrowings.

Fair value of the quoted bonds is based on price quotations at the reporting date. The fair value of

unquoted debt instruments, loans from banks and other financial liabilities as well as other non-current

financial liabilities is estimated by discounting future cash flows using rates for debt with similar terms,

credit risk and maturities.

For the fair value of equity instruments, the Group makes certain assumptions in valuation about the

model inputs, including fair value derived based on comparable transactions. The probabilities of the

various estimates within a range can be reasonably assessed used in the Group’s estimate of fair value

for these unquoted investments in equity instruments. Fair values of quoted investments in equity

instruments are derived from quoted prices in active markets.






55


Description of valuation techniques used and key inputs to valuation investments in equity instruments

is as follows:

Valuation technique Significant unobservable input Range

Market approach Equity value to EBITDA multiple

Midpoint of net asset value and price to book multiple

10.9 to 13.5

0.76

Net asset value

approach

Point estimate of distributable cash and bank balances SR 46.1 to

SR 49.9

Expected returns

approach

Equity value to revenue multiple 0.73

15 Inventories


Finished goods 14,804,387 16,613,402

Spare parts 6,300,920 6,259,412

Raw materials 4,249,678 3,760,273

Goods in transit 1,614,514 2,260,171

Work in process 1,138,499 1,067,591

28,107,998 29,960,849

Less: Provision for slow moving and obsolete items (1,694,418) (1,716,046)

26,413,580 28,244,803

Movements in the provision for obsolete inventories were as follows:

For the year ended

31 December 2019

For the year ended

31 December 2018

Balance at 1 January 1,716,046 1,776,274

Reversal for the year, net (21,628) (60,228)

Balance at 31 December 1,694,418 1,716,046

The Group’s exposure to commodity price risks is discussed in Note 37.

16 Trade receivables


Trade receivables 16,283,174 19,111,571

Due from related parties 2,366,655 3,116,951

18,649,829 22,228,522

Less: allowance for expected credit losses (327,277) (406,673)

18,322,552 21,821,849

Accounts receivable are non-interest bearing and are generally between 30 – 120 days terms.






56

16 Trade receivables (continued)

As of 31 December the ageing analysis of trade receivable along with related expected credit loss is as

follows:

Total

Neither past

due nor

impaired

Less than

60 days

61-90

days

91-180

Days

181-365

days

More than

one year

31 December 2019

Expected credit loss rate - 0.06% 1.32% 9.16% 16.85% 10.71% 50.49%

Gross carrying amount 18,649,829 17,091,871 719,828 55,134 109,513 141,833 531,650

Expected credit loss 327,277 10,656 9,504 5,052 18,457 15,186 268,422

31 December 2018

Expected credit loss rate - 0.15% 1.72% 29.16% 17.34% 35.28% 52.07%

Gross carrying amount 22,228,522 20,442,712 968,193 34,856 114,193 108,073 560,495

Expected credit loss 406,673 30,095 16,655 10,165 19,797 38,132 291,829

The expected credit loss rates for the year ended 31 December 2019 have been decreased compared to 2018

as there were less indications that trade receivables are at risk of credit impairment due to potential financial

difficulties of customers at the end of the reporting period.

Movements in the allowance for expected credit losses were as follows:

For the year

31 December 2019

For the year

31 December 2018

Opening balance 406,673 363,743

Additional allowance for expected credit losses on

adoption of IFRS 9 -

39,610

As at 1 January 406,673 403,353

Charge for the year 1,514 70,411

Reversals during the year (80,910) (67,091)

As at 31 December 327,277 406,673

17 Prepayments and other current assets


Receivables from Japan Saudi Arabia Methanol Company, Inc.

(“JSMC”) (Note 22) 1,687,500 -

Prepaid expenses 1,458,879 1,897,589

Taxes and subsidies receivable 872,634 1,198,681

Current portion of loan receivable from related parties 617,372 184,760

Finance income receivable 71,378 152,964

Employee advances and receivables 73,756 76,569

Others 1,572,236 1,604,294

6,353,755 5,114,857






57

18 Short-term investments

Short-term investments can be broken down as follows:


Time deposits 4,379,820 9,240,289

Investments in debt instruments (Note 11) 1,086,446 575,210

Other short-term investments 92,288 -

5,558,554 9,815,499

Time deposits with banks are of original maturities of more than three months and less than twelve months

and carry commission rates in line with the prevailing market rates.

Other short-term investments include certificate of deposits.

19 Cash and bank balances

Cash and bank balances can be broken down as follows:


Cash in hand 1,085 390

Bank balances 10,018,763 13,152,820

Time deposits 28,292,927 29,437,610

38,312,775 42,590,820

At 31 December 2019, the Group had available SR 8.65 billion (31 December 2018: SR 10.06 billion) of undrawn

committed borrowing facilities.

At 31 December 2019, the Group has funds amounting to SR 0.60 billion (31 December 2018: SR 0.51 billion)

are held in separate bank accounts and are not used as part of normal business operations.

The table below provides details of amounts placed in various currencies:


SR 12,268,977 15,700,877

USD 23,417,389 25,304,981

Others 2,626,409 1,584,962

38,312,775 42,590,820

Cash flows related disclosures

Cash and cash equivalents can be broken down as follows:


Cash and bank balances 38,312,775 42,590,820

Less: bank overdrafts (in short term borrowings - Note 23) (1,346,996) (1,167,589)

36,965,779 41,423,231

Bank overdrafts are used in the normal business operations of the Group and represent cash balances that

cannot be legally off-set.






58

19 Cash and bank balances (continued)

19.1 Cash flows related disclosures (continued)

Change in liabilities arising from financing activities can be broken down as follows:

(i) Includes IFRS 16 related additional leases which were recognised at transition and during the year.

20 Share capital


Authorised shares:

Ordinary shares of SR 10 each 3,000,000 3,000,000

Ordinary shares issued and fully paid of SR 10 each 3,000,000 3,000,000

Issued and paid capital (SR ‘000) 30,000,000 30,000,000

As at

1 January 2019

Charged

during the year Cash flows

Foreign

currency

exchange and

other non-cash

As at

31 December

2019

Debt 46,524,316 2,008,900 (4,273,058) (1,563,508) 42,696,650

Lease 738,925 353,152 (1,721,145) (i) 7,667,974 7,038,906

Dividends to

shareholders 1,215,655 13,200,000 (13,190,127) - 1,225,528

Dividends to non-

controlling interests 1,558,027 6,859,302 (8,228,095) - 189,234

Acquisition of non-

controlling interests - (1,125,000) 1,125,000 - -

50,036,923 21,296,354 (26,287,425) 6,104,466 51,150,318

As at

1 January 2018

Charged during

the year Cash flows

Foreign

currency

exchange and

other non-cash

As at

31 December

2018

Debt 57,198,175 - (10,693,815) 19,956 46,524,316

Finance lease 865,013 61,025 (187,113) - 738,925

Dividends to

shareholders 1,633,220 13,200,000 (12,059,538) - 2,773,682

Dividends to non-

controlling interests - 8,629,709 (8,736,246) 106,537 -

59,696,408 21,890,734 (31,676,712) 126,493 50,036,923






59

21 Reserves

Statutory reserve

In accordance with Saudi Arabian Regulations for Companies, SABIC must set aside 10% of its net income in

each year until it has built up a reserve equal to 30% of the share capital. As the reserve has reached the

minimum amount, SABIC has resolved to discontinue such transfers. This reserve is not available for

distribution.

General reserve

In accordance with SABIC’s By-Laws, the General Assembly can establish a general reserve as an

appropriation of retained earnings. This general reserve can be increased or decreased by a resolution of

the shareholders and is available for distribution.

Other reserves

The following table shows a breakdown of other reserves and the movements during the year:

31 December 2019

Equity

instruments

Foreign

currency

translation

Actuarial

gain (loss)

Cash flow

hedge Total

At the beginning of the year 423,136 (2,699,916) 953,122 (35,526) (1,359,184)

Net change on currency translation

of foreign operations - (328,231) - - (328,231)

Re-measurement impact of

employee benefit obligations (i) - - (1,414,662) - (1,414,662)


investments in equity instruments (137,060) - - - (137,060)

Share of other comprehensive

income (loss) for associates and

joint ventures - (13,317) (30,764) 18,134 (25,947)

Other comprehensive income (loss)

for the year (137,060) (341,548) (1,445,426) 18,134 (1,905,900)

At the end of the year 286,076 (3,041,464) (492,304) (17,392) (3,265,084)

(i) Amount is net of tax and includes amounts recognised by the acquisition of non-controlling interests

(Note 22).






60

21 Reserves (continued)

Other reserves (continued)

31 December 2018

Equity

instruments

Foreign

currency

translation

Actuarial

gain (loss)

Cash flow

hedge Total

At the beginning of the year 28,956 (1,430,422) (792,486) (55,711) (2,249,663)

Adoption of IFRS 9 389,300 (275) - - 389,025

At 1 January 2018 418,256 (1,430,697) (792,486) (55,711) (1,860,638)

Net change on currency translation

of foreign operations - (1,301,215) - - (1,301,215)


employee benefit obligations - - 1,744,012 - 1,744,012


investments in equity instrument 4,880 - - - 4,880

Share of other comprehensive

income for associates and joint

ventures - 31,996 1,596 20,185 53,777

Other comprehensive income (loss)

for the year 4,880 (1,269,219) 1,745,608 20,185 501,454

At the end of the year 423,136 (2,699,916) 953,122 (35,526) (1,359,184)






61

22 Non-controlling interests

Summarised statement of financial position

Set out below is summarised financial information for each subsidiary that has a non-controlling interest that are material to the Group. The amounts disclosed for each

subsidiary are before inter-company eliminations:


YANSAB AR-RAZI YANPET SHARQ KEMYA IBN RUSHD SAFCO KAYAN

(Note 22.1)

Current assets 5,842,703 1,594,284 4,382,164 4,622,300 3,248,122 1,996,387 2,167,998 5,381,729

Current liabilities 1,152,758 402,394 1,604,462 1,107,106 2,087,568 1,278,969 681,385 2,886,750

Current net assets 4,689,945 1,191,890 2,777,702 3,515,194 1,160,554 717,418 1,486,613 2,494,979

Non-current assets 12,227,704 2,886,709 4,680,504 13,283,302 12,617,680 1,365,461 7,494,544 29,946,066

Non-current liabilities 774,837 851,411 1,177,227 2,683,024 3,985,429 3,600,132 984,866 17,488,180

Non-current net assets 11,452,867 2,035,298 3,503,277 10,600,278 8,632,251 (2,234,671) 6,509,678 12,457,886

Net assets 16,142,812 3,227,188 6,280,979 14,115,472 9,792,805 (1,517,253) 7,996,291 14,952,865

Accumulated non-controlling interests (i) 7,756,621 806,797 3,140,493 7,057,736 4,896,403 (729,344) 4,558,685 9,719,362

(i) Accumulated non-controlling interests includes adjustments such as inter-group profit elimination, absorption of income tax in non-controlling interests and

others.






62

22 Non-controlling interests (continued)

Summarised statement of financial position (continued)



Current assets 6,227,525 3,428,862 5,941,261 8,044,262 3,690,629 2,165,665 2,249,981 9,173,922

Current liabilities 1,343,865 2,938,323 2,494,188 1,560,340 2,138,286 984,443 855,264 3,295,944

Current net assets 4,883,660 490,539 3,447,073 6,483,922 1,552,343 1,181,222 1,394,717 5,877,978

Non-current assets 12,844,534 2,818,632 4,415,143 13,867,515 13,129,797 4,074,091 7,254,486 31,521,004

Non-current liabilities 472,499 775,785 847,336 2,439,668 4,701,917 3,752,541 743,154 21,700,622

Non-current net assets 12,372,035 2,042,847 3,567,807 11,427,847 8,427,880 321,550 6,511,332 9,820,382

Net assets 17,255,695 2,533,386 7,014,880 17,911,769 9,980,223 1,502,772 7,906,049 15,698,360

Accumulated non-controlling interests (i) 8,143,373 1,109,028 3,392,926 8,596,724 4,852,558 712,967 4,183,245 9,620,400

(i) Accumulated non-controlling interests includes adjustments such as inter-group profit elimination, absorption of income tax in non-controlling interests and others.






63


Summarised statement of comprehensive income



(Note 22.1)

Revenue 6,064,834 3,430,439 6,209,514 7,877,799 7,244,650 4,308,183 3,287,582 9,536,400

Net income (loss) for the year 1,089,772 1,539,551 1,752,780 464,021 654,656 (2,981,429) 1,473,919 (636,777)

Other comprehensive income (93,280) (48,686) (102,420) (90,217) (80,366) (38,596) (133,677) (108,718)

Total comprehensive income (loss) 996,492 1,490,865 1,650,360 373,804 574,290 (3,020,025) 1,340,242 (745,495)

Net income (loss) attributable to

non-controlling interests (i) 523,635 384,888 808,257 217,744 297,063 (1,433,173) 840,281 (413,905) Dividends to non-controlling

interests 1,013,555 301,759 1,360,172 1,975,000 335,082 - 712,625 -


Revenue 7,628,470 5,249,864 7,859,468 11,383,526 8,766,320 6,302,650 3,859,836 12,263,159

Net income for the year 2,413,978 3,045,453 2,944,221 2,859,182 1,965,479 130,862 1,738,438 1,702,248

Other comprehensive income 73,037 55,640 124,006 93,484 67,696 53,508 140,320 88,645

Total comprehensive income 2,487,015 3,101,093 3,068,227 2,952,666 2,033,175 184,370 1,878,758 1,790,893

Net income attributable to non-

controlling interests (i) 1,156,336 1,360,836 1,304,256 1,406,008 946,798 67,784 874,950 1,007,816

Dividends to non-controlling

interests 946,063 1,938,503 1,424,437 2,131,029 696,144 - 475,083 -

(i) Net income (loss) attributable to non-controlling interests includes adjustments such as inter-group profit elimination, absorption of income tax in non-controlling interests and others.






64


Summarised statement of cash flows

Year ended 31 December 2019


Cash flow from operating activities

2,552,493 1,536,142 3,248,227 2,378,739 2,056,346 470,406 1,785,111 2,198,395

Cash flow (used in) from investing

activities

(317,615) (501,922) (575,949) (469,869) (141,038) (185,148) (409,524) 1,317,477

Cash flow used in financing

activities (2,124,808) (2,937,401) (3,101,884) (4,144,384) (1,930,618) (182,132) (1,314,538) (4,979,746)

Net increase (decrease) in cash and

cash equivalents 110,070 (1,903,181) (429,606) (2,235,514) (15,310) 103,126 61,049 (1,463,874)

Year ended 31 December 2018

Cash flow from operating activities 3,928,161 3,202,785 2,881,894 3,966,259 2,553,916 526,637 2,083,578 3,432,919

Cash flow used in investing

activities (1,857,714) (294,522) (547,071) (408,623) (310,722) (86) (802,588) (2,115,782)

Cash flow used in financing

activities (3,096,501) (1,558,860) (1,711,058) (4,341,786) (2,935,188) (210,573) (833,080) (1,454,539)

Net increase (decrease) in cash and

cash equivalents (1,026,054) 1,349,403 623,765 (784,150) (691,994) 315,978 447,910 (137,402)






65


22.1 Increase of shareholding in a subsidiary

During 2019, SABIC and Japan Saudi Arabia Methanol Company, Inc. (“JSMC”), the partner in Saudi Methanol

Company (“Ar-Razi”) entered into an agreement, whereby SABIC agreed to acquire an additional 25% of

shares in Ar-Razi from JSMC to 75% and renew the Joint Venture Agreement (“JVA”) for 20 years. At the end

of June 2019, all required regulatory approvals were obtained to complete this transaction.

SABIC and JSMC agreed that SABIC will receive a net consideration of SR 4.50 billion from JSMC in three

instalments. The first instalment amounting to SR 1.13 billion (USD 0.30 billion) has been received on 25 June

2019, after offsetting a consideration of SR 0.56 billion (USD 0.15 billion) for the acquisition of additional 25%

shares of Ar-Razi. The remaining two instalments of SR 1.69 billion (USD 0.45 billion) each, will be due on 31

March 2020 and 2021, respectively. The current instalment of receivable has been recorded as part of

prepayments and other current assets and the final discounted instalment has been recorded as part of

other non-current assets. The final instalment has been discounted at 4% per annum.

Considering this transaction is related to the acquisition of an additional ownership interest in a subsidiary

without a change of control, accordingly, it has been accounted for as an equity transaction and excess

consideration over the carrying amount of the non-controlling interests is recognised in equity attributable

to the Parent. The Group has elected to recognise this effect in retained earnings. With respect to the

subsidiary to which these non-controlling interests relate, there were accumulated components recognised

in OCI amounting to SR 15 million which has been reallocated within equity of the Parent.

As part of the transaction, SABIC obtains an obligation to acquire the remaining shares of Ar-Razi from

JSMC at the end of the twentieth year. As a result, the non-controlling interests attributable to JSMC is

reclassified to non-current liabilities at each reporting date as management’s best estimate for the net

present value of the settlement price payable at the end of the agreement.

The accounting impact of the transaction can be summarised as follows:

Consideration from JSMC 5,062,500

Less: acquisition of 25% shares in Ar-Razi (562,500)

Net consideration 4,500,000

Discounting of third instalment (112,500)

Net consideration after discounting at 4% per annum 4,387,500

Add: carrying value of the additional shares in Ar-Razi 847,811

Less: transfer of other comprehensive income (15,154)

Excess recognised in retained earnings 5,220,157






66

23 Debt

Total debt can be broken down as follows:

Interest rate 31 December 2019 31 December 2018

Current

Short-term bank borrowings USD LIBOR variable rate 1,346,996 1,167,589

Current portion of long-term debt SAIBOR and USD LIBOR 3,746,233 3,664,754

Euro bonds 2.75% 3,143,059 -

6,889,292 3,664,754

Lease liabilities 4.04% (average) 1,271,843 -

Finance lease liabilities 5.7% to 9.6% - 85,502

1,271,843 85,502

8,161,135 3,750,256

Non-current

Long-term debt SAIBOR and USD LIBOR 27,022,454 31,058,023

USD bonds 4.0% to 4.5% 7,437,908 10,633,950

34,460,362 41,691,973

Lease liabilities 3.0%-5.0% (IBR-average) 5,767,063 -

Finance lease liabilities 5.7% to 9.6% - 653,423

5,767,063 653,423

40,227,425 42,345,396

49,735,556 47,263,241

Long-term debt

The Group obtained commercial loans from various financial institutions in order to finance its growth

projects and acquisitions, which are repayable in instalments at varying interest rates in conformity with the

applicable loan agreements. The Public Investment Fund (“PIF”) and Saudi Industrial Development Fund

(“SIDF”) term loans are generally repayable in semi-annual instalments and financing charges on these loans

are at various rates.

Bonds

The following bonds were outstanding as of 31 December 2019:

In October 2018, SABIC Capital II BV, an indirect wholly owned subsidiary of SABIC, issued a 5 year and

10 year USD 1 billion bond each, equivalent to total SR 7.5 billion. These bonds are unsecured and carry

coupon rates of 4.0% and 4.5% for those maturing in 5 and 10 years, respectively. The bonds are issued

in accordance with Rule 144A/Reg S offering requirements under the U.S. Securities Act of 1933, as

amended. The bonds are listed on the Irish Stock Exchange (Euronext Dublin) and the proceeds were

used for refinancing maturing debt.

On 20 November 2013, SABIC Capital I B.V. issued a 7 year € 0.75 billion bond with a coupon of 2.75%.

The proceeds were used to redeem Eurobond € 0.75 billion. The bond matures in November 2020.






67

23 Debt (continued)

The aggregate repayment schedule of long-term debt is as follows:

31 December 2019 31 December 2018 Within one year 8,236,288 4,832,343

1-2 years 5,172,232 7,388,859 2-5 years 18,061,631 25,510,327 Thereafter 11,226,499 8,792,787 Lease obligation 7,038,906 738,925

Total 49,735,556 47,263,241

During 2019, certain group subsidiaries underwent a refinancing of the term loans and this has been

reflected in the above loan maturity table.

The maturity of the lease obligation and debt are further elaborated in liquidity risk (Note 37).






68

24 Employee benefits

The provision for employee benefits can be broken down as follows:


Defined benefit obligations

End of service benefits 13,024,992 10,598,972

Defined benefits pension schemes 2,500,834 2,226,295

Post-retirement medical benefits 1,345,462 1,154,575

16,871,288 13,979,842

Other long term employee benefits and termination benefits

Long-term service awards 149,305 125,340

Early retirement plans 32,150 37,311

Others 996,105 857,532

1,177,560 1,020,183

18,048,848 15,000,025

Management monitors the risks of all its pension plans and issues guidelines regarding the governance and

risk management of these pension plans, particularly with regard to the funding of the pension plans and

the portfolio structure of the existing plan assets. The obligations and plan assets, used to fund the

obligations, are subject to demographic, legal and economic risks. Economic risks are primarily due to

unforeseen developments in goods and capital markets. Some plans with defined benefits were closed for

future service. This led to a reduction in risk with regard to future benefit levels.

Defined benefits obligation

The Group provides end of service and pension benefits to its employees taking into consideration the local

labour laws, employment market and tax laws of the countries where the companies are located. Outside

KSA, the Group limits the risks of changing financial market conditions and demographic developments by

offering a defined contribution scheme to new-hires in most countries. The defined benefit plans in US and

Canadian plan were therefore closed for future pension accrual from 31 December 2019.

End of service benefits

End of service benefits are mandatory for all KSA based employees under the Saudi Arabian labour law and

the Group’s employment policies. End of service benefit is based on employees’ compensation and

accumulated period of service and is payable upon termination, resignation or retirement. The Defined

Benefit Obligation (“DBO”) in respect of employees’ end of service benefits is calculated by estimating the

future benefit payment that employees have earned in return for their service. This amount applying an

appropriate discount rate is used to determine the present value of the Group’s obligation. This is an

unfunded plan.

Re-measurements are recognised immediately in the consolidated statement of financial position with a

corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-

measurements are not reclassified to consolidated statement of income in subsequent periods.






69

24 Employee benefits (continued)

Defined benefits obligation (continued)

Defined benefit pension plans

The Group has a number of defined benefit pension plans outside KSA. The most significant plans are

located in the United States of America (“USA”) and in the United Kingdom (“UK”). These plans are funded

pension plans. Other pension plans include plans in Germany, Austria, Japan, Taiwan, Canada, France and

Belgium, most of which are funded. The benefits provided by these pension plans are based primarily on

years of service and employee compensation.

The funding of the plans is consistent with local law and regulations in the countries of establishment.

Generally, pension obligations are subject to a government regulation, including minimum funding

requirements. Furthermore, there are restrictions in qualitative and quantitative terms for the investment in

different asset categories. This could result in fluctuating employer contributions, additional financing

requirements and the assumption of obligations in favour of the pension fund to comply with these

regulatory requirements.

Below is a brief description of the Group’s main defined benefit pension plans:

United States of America

In the USA, the Group has a number of qualified legacy defined benefit pension plans. These plans are

subject to the applicable provisions of the Employee Retirement Income Security Act of 1974, as amended

(“ERISA”). The funding policy for the US Plans is to make regular contributions each year in such amounts

that are necessary to meet or exceed the minimum funding standard as set forth in employee benefit and

tax laws in the USA. The group also has a supplementary non-qualified pension plan.

As of 1 January 2020, all accrual in the US plans are frozen. Going forward, employees participate in

alternative defined contribution arrangements. The effect of this freeze in benefit accrual was recognised

in the 2019 financial statements.

These defined benefit pension plans are administered by fiduciaries, who represents the interests of the

beneficiaries and ensure that the benefits can be paid in the future.

United Kingdom

In the UK, the Group maintained final salary pension plans that have been closed to further increases in

benefits for future years of service. A part of the UK workforce still accrue pension benefits due to salary

increases. Since the closure of service accrual, all employees have had the opportunity to participate in a

defined contribution plan.

The defined benefit pension plans are administered by trusts, whose Boards of Trustees, according to the

trustees’ agreement and law, represent the interests of the beneficiaries to ensure that the benefits can be

paid in the future. The required funding is determined using technical valuations according to local

regulations every three years. Pensions are adjusted each year to compensate for increases in the cost of

living.






70


Other long-term employee benefits

Early retirement plans

Employee early retirement plan costs are provided for in accordance with the Group’s employee benefit

policies. If an instalment based compensation is agreed on, the obligation is initially discounted to its

present value and then unwound through the period of compensation, which can be up to the regular

retirement age of the employee.

Long-term service awards

The Group offers a long-term service award to its employees depending on years of service. This is

measured similarly to a DBO, however, any re-measurement is recognised in the current year consolidated

statement of income.

The following table represents the movement of the net pension position:

For the year

ended 31

December 2019

For the year

ended 31

December 2018

At the beginning of the year 13,950,335 16,551,957

Current service cost 1,114,016 1,489,315

Past service cost (11,979) (283,821)

Finance cost, net of finance income 563,399 557,467

Actuarial changes arising due to:

- financial assumptions 2,494,657 (1,863,573)

- demographic changes (41,449) (101,639)

- experience adjustments (259,333) (404,933)

- actual return on plan assets (408,521) 222,252

1,785,354 (2,147,893)

Benefits paid during the year (439,876) (1,980,715)

Contributions into pension plans (223,260) (308,526)

Foreign currency translation adjustment and others 87,963 72,551

16,825,952 13,950,335

Reclassification to net pension asset (*) 45,336 29,507

At the end of the year 16,871,288 13,979,842

*Net pension assets are presented under non-current assets.






71


Following table represents the components of the employee benefits in the KSA:


End of service

Post-retirement

medical Total

At the beginning of the year 10,598,972 827,260 11,426,232

Current service cost 889,037 46,119 935,156

Finance cost 446,913 34,221 481,134


- financial assumptions 1,478,288 150,859 1,629,147

- experience adjustments (91,817) (33,569) (125,386)

1,386,471 117,290 1,503,761

Benefits paid during the year (322,836) (84,957) (407,793)

Others 20,639 71,554 92,193

At the end of the year 13,019,196 1,011,487 14,030,683


End of service

Post-retirement

medical Total

At the beginning of the year 12,846,175 589,463 13,435,638

Current service cost 849,404 425,964 1,275,368

Finance cost 443,941 20,195 464,136


- financial assumptions (1,602,947) 17,104 (1,585,843)

- experience adjustments (183,674) (158,423) (342,097)

(1,786,621) (141,319) (1,927,940)

Benefits paid during the year (1,894,134) (52,602) (1,946,736)

Others 140,207 (14,441) 125,766

At the end of the year 10,598,972 827,260 11,426,232






72


Following table represents the components of the DBO outside KSA at 31 December 2019:


USA UK Others Total

At the beginning of the year 2,767,092 2,516,104 881,940 6,165,136

Current service costs 158,465 - 20,395 178,860

Past service costs (12,931) 952 - (11,979)

Finance costs 111,764 71,761 21,388 204,913

Benefits paid during the year (183,779) (80,398) (30,408) (294,585)


- financial assumptions 526,517 237,644 101,349 865,510

- demographic changes (4,080) (38,081) 712 (41,449)

- experience adjustments 48,510 (168,635) (13,822) (133,947)

570,947 30,928 88,239 690,114

Foreign currency and others - 84,284 (26,622) 57,662

3,411,558 2,623,631 954,932 6,990,121

Reclassification as net pension asset - - (229,732) (229,732)

At the end of the year 3,411,558 2,623,631 725,200 6,760,389

The development of plan assets for these major plans in the different regions can be shown as follows:


USA UK Others Total

Plan assets as at start of the year 1,478,865 1,911,873 250,295 3,641,033

Interest income 59,538 54,117 8,993 122,648

Employers’ contribution 162,476 38,296 22,488 223,260

Return on plan assets (excluding

interest income) 201,490 171,649 35,382 408,521


Administrative expenses (13,408) - (415) (13,823)

Foreign currency and others - 66,382 9,333 75,715

Plan assets as at end of the year 1,736,190 2,161,919 296,743 4,194,852

Reclassification as net pension assets - - (275,068) (275,068)

Plan assets at end of the year 1,736,190 2,161,919 21,675 3,919,784

Defined benefit obligation, net 1,675,368 461,712 703,525 2,840,605






73


Following table represents the components of the DBO outside the KSA at 31 December 2018:


USA UK Others Total

At the beginning of the year 3,227,844 2,850,210 946,352 7,024,406

Current service costs 191,740 - 22,207 213,947

Past service costs (275,757) 716 (8,780) (283,821)

Finance costs 116,607 73,036 21,942 211,585



- financial assumptions (247,148) (14,921) (15,661) (277,730)

- demographic changes (10,559) (87,670) (3,410) (101,639)

- experience adjustments (67,629) 6,324 (1,531) (62,836)

(325,336) (96,267) (20,602) (442,205)

Foreign currency - (161,838) (49,087) (210,925)

2,767,092 2,516,104 881,940 6,165,136

Reclassification as net pension asset - - (198,271) (198,271)

At the end of the year 2,767,092 2,516,104 683,669 5,966,865

The development of plan assets for major plans in the different regions can be shown as follows:


USA UK Others Total

Plan assets as at start of the year 1,463,419 2,165,539 279,129 3,908,087

Interest income 53,377 55,425 9,452 118,254

Employers’ contribution 262,013 39,069 7,444 308,526

Return on plan assets (excluding

interest income) (136,807) (75,375) (10,070) (222,252)


Administrative expenses (13,516) - (510) (14,026)

Foreign currency - (123,030) (20,654) (143,684)

Plan assets as at end of the year 1,478,865 1,911,873 250,295 3,641,033

Reclassification as net pension assets - - (227,778) (227,778)

Plan assets at end of the year 1,478,865 1,911,873 22,517 3,413,255

Defined benefit obligation, net 1,288,227 604,231 661,152 2,553,610






74


For the year ended

31 December 2019

For the year ended

31 December 2018

Net benefit expense

Current service cost and past service cost 1,102,037 1,205,494

Finance cost on benefit obligation 563,399 557,467

Net benefit expense 1,665,436 1,762,961

Employee pension plan assets:

The following table represents the categories of plan assets for the major pension plans outside KSA:


USA UK Others

Quoted and unquoted

Equity 39.59% 32.88% -

Debt securities 29.71% 1.19% 92.29%

- Government debtors - - 92.29%

- Other debtors 29.71% 1.19% -

Investment funds and insurance companies - 46.76% 6.64%

Other investments 28.30% 15.53% 1.07%

Cash and cash equivalents 2.40% 3.64% -

Total 100.00% 100.00% 100.00%


USA UK Others

Quoted and unquoted

Equity 36.90% 33.54% 37.02%

Debt securities 29.27% 1.09% 60.17%

- Government debtors - 1.09% 60.17%

- Other debtors 29.27% - -

Investment funds and insurance companies - 46.56% 1.58%

Other investments 31.14% 18.26% 1.23%

Cash and cash equivalents 2.69% 0.55% -

Total 100.00% 100.00% 100.00%






75


The major economic and actuarial assumptions used in benefits liabilities computation can be shown as

follows:

31 December 2019

KSA USA UK

Discount rate 3.10% 3.12% 2.10%

Average salary increase 5.50% - 7.00% - 2.91%

Pension in payment increase N/A N/A 2.90%

Inflation rate (health care cost)

9% in 2020 Dec.

to 5% for 2024+ N/A N/A

31 December 2018

KSA USA UK

Discount rate 4.40% 4.16% 2.90%

Average salary increase 5.50% to 7.00% 3.22% 3.21%

Pension in payment increase N/A N/A 3.25%

Inflation rate (health care cost)

9% in 2019

decrease to 5%

for 2023+ N/A N/A

Sensitivity analysis

The table below illustrates the approximate impact on the DBO if the Group were to change one key

assumption, while the other actuarial assumptions remain unchanged. The sensitivity analysis is intended

to illustrate the inherent uncertainty in the valuation of the DBO under market conditions at the

measurement date. These results cannot be extrapolated due to non-linear effects that changes in key

actuarial assumptions may have on the total DBO. The sensitivities only apply to the DBO and not to the net

amounts recognised in the consolidated statement of financial position. Movements in the fair value of plan

assets would, to a certain extent, be expected to offset movements in the DBO resulting from changes in the

given assumptions.

31 December 2019

KSA USA UK Others

Increase

Discount rate (+25 bps) (380,757) (139,156) (129,863) (27,822)

Salary (+25 bps) 357,126 - 17,504 19,887

Pension (+25 bps) N/A - 105,204 31,230

Longevity (+1 year) N/A 55,302 85,345 (5,969)

Health care costs (+25 bps) 30,808 N/A N/A N/A

Decrease

Discount rate (-25 bps) 397,222 147,770 139,310 51,900

Salary (-25 bps) (344,607) - (17,160) 2,429

Pension (-25 bps) N/A - (99,449) (7,910)

Longevity (-1 year) N/A (56,645) (84,488) 27,987

Health care costs (-25 bps) (29,376) N/A N/A N/A






76


Sensitivity analysis (continued)

31 December 2018

KSA USA UK Others

Increase

Discount rate (+25 bps) (287,462) (104,965) (129,394) (33,532)

Salary (+25 bps) 278,079 133 30,668 7,745

Pension (+25 bps) N/A - 94,662 17,641

Longevity (+1 year) N/A 38,245 71,718 (14,807)

Health care costs (+25 bps) 23,010 N/A N/A N/A

Decrease

Discount rate (-25 bps) 299,478 111,092 138,607 35,715

Salary (-25 bps) (268,468) (131) (29,895) (7,358)

Pension (-25 bps) N/A - (89.594) (16,685)

Longevity (-1 year) N/A (39,562) (71,355) 14,511

Health care costs (-25 bps) (21,991) N/A N/A N/A

Expected total benefit payments can be broken down as follows:

31 December 2019

KSA Outside KSA

Within one year 639,390 260,473

1 – 2 years 662,975 266,897

2 – 3 years 772,542 275,034

3 – 4 years 832,338 290,616

4 – 5 years 895,735 296,053

Next 5 years 5,556,889 1,517,999

Total 9,359,869 2,907,072

31 December 2018

KSA Outside KSA


1 – 2 years 585,755 339,374

2 – 3 years 644,072 352,686

3 – 4 years 737,023 370,104

4 – 5 years 810,999 387,863

Next 5 years 5,229,918 2,067,327

Total 8,599,280 3,835,327

Annual premiums paid to defined contribution schemes amount to SR 0.38 billion (2018: SR 0.39 billion) and

relate primarily to defined contribution pension schemes.

The expected employer contributions related to the defined benefit pension plans for 2020 amount to

SR 0.21 billion (2018: SR 0.15 billion).

The weighted average duration of the defined benefit obligation is 11 years for KSA plans, 18 years for plans

outside KSA (31 December 2018: 10 years for KSA plans, 20 years for plans outside KSA).






77

25 Trade payables

Trade payables can be broken down as follows:


Trade accounts payable 12,865,317 14,938,392

Amounts due to related parties 22,858 30,965

12,888,175 14,969,357

The Group’s exposure to currency and liquidity risk related to accounts payables is disclosed in Note 37.

26 Accruals and other current liabilities

Accruals and other current liabilities can be broken down as follows:


Accrued liabilities 6,695,100 6,250,270

Employees related liabilities 1,841,134 2,461,530

Dividends payable 1,414,762 2,773,682

Sales and other tax payables 364,716 855,243

Interest payable 125,301 201,432

Contract retentions 97,863 112,201

Others 1,030,538 742,114

11,569,414 13,396,472

27 Derivatives

Derivatives can be broken down as follows:


Derivative asset:

Non designated hedging relationship

- Foreign exchange forward contracts - 29,651

Notional amount - 615,342


Derivative liability:

Non designated hedging relationship

- Foreign exchange forward contracts - 381

Notional amount - 291,967






78

28 Revenue

Revenue can be broken down as follows:

For the year ended

31 December 2019

For the year ended

31 December 2018

Sales of goods 135,583,899 164,896,782

Logistic services 3,467,061 3,518,301

Rendering of services 686,424 713,256

139,737,384 169,128,339

There is no significant revenue that has been recognised in 2019 from performance obligations satisfied in

previous years. All unfulfilled remaining performance obligations as at 31 December 2019 are expected to

be satisfied in the following year.

Refer to Note 36 for the segment and geographical distribution of revenue.

Contract balances

Payment terms are immediate to a maximum of 120 days from the date of invoice. Date of invoice is usually

prior to, or at the time of fulfilling the related performance obligations. Consequently, the Groups holds no

material contract assets and recognises contract liabilities when amounts are invoiced prior to fulfilment of

performance obligations.

There are no significant changes of contract assets or contract liability balances during the year. The Group

recognises all incremental costs of obtaining contracts as an expense when incurred as the amortisation

period of the assets that the Group otherwise would have recognised is one year or less.

29 Expenses

Based on the nature of expense, cost of sales, selling and distribution expenses and general and

administrative expenses can be broken down as follows:

29.1 Cost of sales

For the year ended

31 December 2019

For the year ended

31 December 2018

Changes in inventories of finished products, raw materials and

consumables used 76,060,015

83,389,610

Depreciation and amortisation 15,146,930 14,132,925

Employee related costs 9,394,793 13,294,298

Impairments and write-offs of plant and equipment and

intangible assets 3,615,453 470,183

104,217,191 111,287,016






79

29 Expenses (continued)

29.2 General and administrative expenses

For the year ended

31 December 2019

For the year ended

31 December 2018

Employee related expenses 4,439,123 4,997,965

Professional and other consultant services 1,840,802 1,834,609

Research and technology cost 1,625,762 1,825,235

Depreciation and amortisation 1,444,128 941,236

Maintenance 621,808 656,025

Administrative support 252,161 514,064

Others 453,404 391,884

10,677,188 11,161,018

29.3 Selling and distribution expenses

For the year ended

31 December 2019

For the year ended

31 December 2018

Transportation and shipping 7,880,148 7,995,009

Employee related expenses 1,692,436 1,578,477

Rental and lease expenses - 389,374

Marketing expenses 297,937 153,468

Depreciation and amortisation 118,607 61,920

Others 20,870 221,689

10,009,998 10,399,937

30 Finance cost

Finance cost can be broken down as follows:

For the year ended

31 December 2019

For the year ended

31 December 2018

Interest expense on loans and borrowings 1,633,522 2,027,623

Interest expense on lease liabilities (Note 38) 353,152 61,025

Interest expenses related to defined benefit plans (Note 24) 563,399 557,467

2,550,073 2,646,115






80

31 Other expenses, net

Other expenses, net can be broken down as follows:

For the year ended

31 December 2019

For the year ended

31 December 2018

Dividend from investments in equity instruments 81,260 61,631

Insurance claims 258,035 147,216

Foreign currency exchange differences (82,588) (193,489)

Rental income 59,238 39,010

Loss on disposal of property, plant and equipment (110,808) (179,700)

Write-offs of property, plant and equipment (260,220) -

Others (73,313) (298,423)

(128,396) (423,755)

32 Zakat and income tax

The movement in Group’s zakat and income tax payable can be shown as follows:


Zakat Income Tax Total

At the beginning of the year 2,843,143 1,753,696 4,596,839

Provided during the year 2,100,000 1,029,599 3,129,599

Paid during the year, net (2,457,461) (1,752,463) (4,209,924)

Other movements (foreign currency

translations and reclassification) (3,063)

(31,935)

(34,998)

At the end of the year 2,482,619 998,897 3,481,516


Zakat Income Tax Total

At the beginning of the year 2,619,140 1,921,891 4,541,031

Provided during the year 2,600,000 1,503,406 4,103,406

Paid during the year, net (2,375,997) (1,631,990) (4,007,987)

Other movements - (39,611) (39,611)

At the end of the year 2,843,143 1,753,696 4,596,839

The movement in Group’s deferred tax is as follows:

For the year ended 31

December 2019

For the year ended 31

December 2018

Deferred tax

assets

Deferred tax

liabilities

Deferred tax

assets

Deferred tax

liabilities

At the beginning of the year 865,156 1,664,138 1,518,599 2,597,059

Changes during the year (i) (153,547) (51,389) (653,443) (932,921)

At the end of the year 711,609 1,612,749 865,156 1,664,138

(i) Includes impact of foreign exchanges translation and non-controlling interests






81

32 Zakat and income tax (continued)

32.1 Zakat

Zakat returns of SABIC and wholly owned subsidiaries are submitted to the General Authority of Zakat and

Tax (“GAZT”) based on separate financial statements prepared for zakat purposes only. Other non-wholly

owned subsidiaries file their zakat returns separately. SABIC has filed its zakat returns with GAZT, received

the zakat certificates, settled the zakat dues up to the year ended 31 December 2018. SABIC cleared its zakat

assessments with GAZT up to the year ended 31 December 2016.

32.2 Income Tax

The major components of income tax in the consolidated statement of income can be broken down as

follows for the year ended 31 December:

For the year ended

31 December 2019

For the year ended

31 December 2018

Current corporate income tax

Current year 1,005,530 1,503,406

Adjustments in respect of current income tax of previous year 24,069 -

Deferred corporate income tax

Origination and reversals of temporary differences 89,871 (305,745)

1,119,470 1,197,661

For the year ended

31 December 2019

For the year ended

31 December 2018

Deferred tax related to items recognised in OCI during in the year

- Deferred tax expense on re-measurement of defined benefit

plans 10,401

5,204

Deferred tax charged to OCI 10,401 5,204






82


32.2 Income Tax (continued)

The numerical reconciliation of income tax expense derived from the accounting profit is presented in the

table below:

For the year ended

31 December 2019

For the year ended

31 December 2018


Exclude: income subject to Zakat (13,029,017) (27,830,507)

Income subject to income tax (1,346,711) 7,852,561

Domestic income tax rate (KSA) 20% 20%

Income tax at domestic tax rate (269,342) 1,570,512

Tax effects of

- Current year tax benefits not recognised 932,306 315,213

- Foreign currency translation results (84,428) (405,308)

- Deviating rates (90,871) (26,800)

- Tax rate changes 22,872 (94,415)

- Tax charge due to other liabilities (22,836) 183,229

- Return-to-provision true-ups and exempt items (11,358) (566,923)

- Non-tax deductible expenses 100,457 198,135

- Result on associates and joint ventures 390,309 -

- Recognition of previously unrecognised tax benefits - (81,560)

- Deferred tax on outside basis 35,760 27,473

- State, local and other taxes 116,601 78,105

Income tax expense 1,119,470 1,197,661

Zakat expense 2,100,000 2,600,000

Total income tax and zakat expense 3,219,470 3,797,661






83


32.2 Income Tax (continued)

Components of deferred tax are as follows:


Difference in accounting and tax base related to:

- Property, plant and equipment and intangible assets (3,155,471) (3,466,676)

- Inventories (16,317) (29,120)

- Right of use assets (509,850) -

- Outside basis differences (219,750) (170,083)

- Others (29,588) (58,584)

Deferred tax liabilities (3,930,976) (3,724,463)

Set-off with deferred tax assets 2,318,227 2,060,325

Net deferred tax liabilities (1,612,749) (1,664,138)

Net operating losses 7,522,557 7,279,239

Difference in accounting and tax base related to:

- Property, plant and equipment and intangible assets 137,890 445,332

- Employee benefits 619,862 583,956

- Lease liabilities 516,654 -

- Deferred charges 203,957 10,912

- Provisions on receivables and inventories 236,716 355,480

- Interest carry-forward 291,402 9,884

- Tax credits 136,882 145,754

- Others 223,033 66,687

Deferred tax assets 9,888,953 8,897,244

Un-recognised deferred tax assets (6,859,117) (5,971,763)

Set-off with deferred tax liabilities (2,318,227) (2,060,325)

Net deferred tax assets 711,609 865,156

The Group offsets tax assets and liabilities, if, and only if, it has a legally enforceable right to set off current

tax assets and current tax liabilities and the deferred tax assets and deferred to income taxes levied by the

same tax authority.

The Group has tax losses of SR 30.07 billion (2018: SR 27.74 billion) with carry-forward periods ranging from

2022 to indefinite, which are available for offsetting against future taxable profits of the companies in which

the losses arose.






84

33 Basic and diluted earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary

equity holders of the (Parent) by the weighted average number of ordinary shares during the year.

Diluted earnings per share amounts are calculated by dividing the net profit for the year attributable to

ordinary equity holders of the (Parent) by the weighted average number of ordinary shares outstanding

during the year plus the weighted average number of ordinary shares that would be issued on conversion

of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the income and share data used in the basic and diluted earnings per share

computations:

For the year ended

31 December 2019

For the year ended

31 December 2018

Income from operations (SR ‘000) 14,833,007 36,280,368

Net income attributable to equity holders of the Parent

(SR ‘000) 5,563,271

21,520,678

Weighted average number of ordinary shares (‘000) 3,000,000 3,000,000

Earnings per share from income from operations (SR) 4.94 12.09

Earnings per share from net income attributable to equity

holders of the Parent (SR) 1.85

7.17

There has been no item of dilution affecting the weighted average number of ordinary shares.






85

34 Conventional and non-conventional financing and investments

The tables below outline the breakdown of Group’s financing and investments into conventional and non-

conventional:


Cash and bank balances

- Conventional call (excluding fixed term deposits) 9,086,727 11,221,338

- Conventional time deposits 5,627,918 3,556,550

Conventional cash and bank balances 14,714,645 14,777,888

- Murabaha (including fixed term deposits) 22,665,009 25,881,062

- Current accounts (excluding fixed term deposits) 933,121 1,931,870

Non-conventional cash and bank balances 23,598,130 27,812,932

Total cash and bank balances 38,312,775 42,590,820

Short-term and investments in debt instruments

- Conventional time deposits 690,871 478,075

- Bonds and floating rate notes 450,835 556,151

- Other investments 92,288 -

Conventional short-term and investments in debt instruments 1,233,994 1,034,226

- Murabaha (including fixed time deposits) 3,688,949 8,762,214

- SUKUK 1,344,629 1,861,143

- Murabaha structured deposits 636,574 651,796

Non-conventional short-term and investments in debt

instruments 5,670,152 11,275,153

Total short-term and investments in debt instruments 6,904,146 12,309,379

Investments in equity instruments

- Mutual funds 313,141 305,294

- Equity investments 732,868 784,815

Conventional investments in equity instruments 1,046,009 1,090,109

Total investments in equity instruments 1,046,009 1,090,109






86

34 Conventional and non-conventional financing and investments (continued)


Short-term borrowings

- Conventional short-term borrowings 1,346,996 1,167,589

Total short-term borrowings 1,346,996 1,167,589

Long and short-term debt

- Conventional loans 11,106,601 11,796,848

- Bonds/notes 10,580,967 10,633,950

- Lease liabilities 7,038,906 738,925

Conventional long-term debt 28,726,474 23,169,723

- Murabaha 13,892,718 16,486,010

- SIDF 1,367,422 1,678,192

- Ijarah facilities and others 4,401,946 4,761,727

Non-conventional long-term debt 19,662,086 22,925,929

Total long-term debt 48,388,560 46,095,652

Total debt 49,735,556 47,263,241

For the year ended

31 December 2019

For the year ended

31 December 2018

Borrowing cost capitalised during the year:

- Conventional loans - 23,568

Borrowing costs capitalised from conventional loans - 23,568

- Murabaha loans and SIDF 3,026 15,151

Borrowing costs capitalised from non-conventional loans 3,026 15,151

Total borrowing cost capitalised during the year 3,026 38,719






87

34 Conventional and non-conventional financing and investments (continued)

For the year ended

31 December 2019

For the year ended

31 December 2018

Finance income

- Conventional call account 2,452 3,555

- Conventional time deposits 240,662 187,680

- Conventional structured deposits 5,415 28,513

- Derivatives 9,521 (11,577)

- Others 2,487 76,484

Total conventional finance income 260,537 284,655

- Current Murabaha (including fixed term deposits) 757,908 1,035,951

- SUKUK 79,167 82,571

- Murabaha structured deposits 25,505 19,543

Total non-conventional finance income 862,580 1,138,065

Total finance income 1,123,117 1,422,720

Finance cost

- Conventional loans 274,288 695,355

- Conventional loans - (related party) 88,318 108,158

- Bonds/notes 406,901 359,675

- Lease liabilities 353,152 61,025

- Net interest on employee benefits 563,399 557,467

- Others 105,187 146,795

Conventional finance cost 1,791,245 1,928,475

- SIDF 59,404 68,381

- Murabaha 623,198 575,235

- Ijarah facilities and others 76,226 74,024

Non-conventional financial expenses 758,828 717,640

Total finance cost 2,550,073 2,646,115






88

35 Related party transactions and balances

Interests in subsidiaries are set out in Note 42.

Related party transactions and balances can be broken down as follows:

Sales to related

parties

Purchases from

related parties

Amounts owed by

related parties

Amounts owed to

related parties

For the year ended


Associates 135,751 7,419,299 181,688 241,276

Joint ventures 12,017,790 675,859 2,399,183 26,838

31 December 2019

Associates Joint ventures Total

Loans from related parties - 1,876,783 1,876,783

Loans to related parties 35,135 678,312 713,447



Dividends paid to related parties 587,500 4,659,490 5,246,990

Dividends received from related parties 242,323 929,142 1,171,465

Sales to related

parties

Purchases from

related parties

Amounts owed by

related parties

Amounts owed to

related parties

For the year ended


Associates 16,763 8,438,035 25,818 368,434

Joint ventures 16,633,292 665,301 3,256,958 45,798

31 December 2018


Loans from related parties - 2,309,743 2,309,743

Loans to related parties 35,135 769,654 804,789



Dividends paid to related parties 650,000 7,581,939 8,231,939

Dividends received from related parties 148,619 504,217 652,836

Terms and conditions of transactions with related parties

The sales to and purchases from related parties are made at terms equivalent to those that prevail in arm’s

length transactions. Outstanding balances are unsecured, interest free and settled in cash. There have been

no guarantees provided or received for any related party receivables or payables. For the year ended 31

December 2019, the Group has not recorded any impairment of receivables relating to amounts owed by

related parties. This assessment is undertaken each financial year by examining the financial position of the

related party and the market in which the related party operates.






89

35 Related party transactions and balances (continued)

Transactions and balances with the Saudi government can be shown as follows:

For the year ended

31 December 2019

For the year ended

31 December 2018

Purchases of goods and services 35,659,076 40,452,392

Sales of goods and services 8,812,649 7,135,370

Due to entities controlled by Saudi government 2,072,071 2,630,608

Due from entities controlled by Saudi government 667,658 705,569

Key management personnel compensation

In addition to remunerations to key management personnel, the Group also provides non-cash benefits to

directors and executive officers, and contributes to a post-employment defined benefit plan on their behalf.

Remuneration of key management can be shown as follows:

For the year ended

31 December 2019

For the year ended

31 December 2018

Short-term employee benefits 58,980 70,040

Post-employment benefits 448 494

Other long-term benefits 3,879 8,727

Total 63,307 79,261






90

36 Segment information

For management purposes, the Group is organised into three Strategic Business Units (“SBU”) and Hadeed,

a wholly-owned manufacturing business, which based on its products are grouped in three reporting

segments.

The Petrochemicals SBU consists of chemicals and polymer products. Chemical products are produced from

hydrocarbon feedstock including methane, ethane, propane, butane, and light naphtha, with a wide range

of products including olefins, methanol, aromatics, glycols, carbon dioxide, ethylene, methyl tert-butyl ether

(MTBE) and other chemicals. Polymer products include Polyethylene (PE) and Polypropylene (PP). The PE

range includes all of the commodity thermo-polymers: Linear Low Density Polyethylene (LLDPE), Low Density

Polyethylene (LDPE), and High Density Polyethylene (HDPE). The PP product range includes Random, Homo

polymer, copolymer and specialty automotive grades. Other key products include Polycarbonate (PC),

Polyester, Polyvinylchloride (PVC), Polystyrene, and PP compounding and Stamax.

The Specialties SBU – includes polymer technologies, application development on a global scale, innovative

process technologies, and environmentally responsible solutions in almost every area of modern life, from

automotive, aviation and electronics to construction, alternative energy, and health care. Specialties’

portfolio of flagship products – NORYL™, ULTEM™ , EXTEM™ and SILTEM™ resins, a vast range of LNP™

compounds and copolymers, and a variety of thermosets and additives – helps meet complex thermal,

mechanical, optical and electrical performance and sustainability requirements.

As the Specialties SBU does not meet the individual reporting requirements of IAS 8 ‘Segment Reporting’ the SBU amounts are included as part of the Petrochemicals’ reporting segment.

The Agri-Nutrients SBU – includes production of a range of fertilisers; including urea, ammonia, phosphate,

as well as compound fertilisers.

Hadeed is concerned with production of steel products; long products (e.g. rebar) and flat products.

The Executive Management Committee, chaired by the Chief Executive Officer monitors the results of its

segments for the purpose of making decisions about resource allocation and performance assessment.

Segment performance is evaluated based on income statement and is measured consistently with profit or

loss in the consolidated financial statements.

Based on management decision and in line with changes in management reporting, the income, expenses,

assets and liabilities relating to 'Corporate' segment, in prior years, has been allocated over the Petro-

chemicals and Specialties SBU, Agri-nutrients SBU and Hadeed according to an internally agreed consistent

basis. Accordingly, segment information for prior year are restated in line with current year presentation.

All intercompany transactions within the reporting segments have been appropriately eliminated.






91

36 Segment information (continued)

The segments’ financial details are shown below:


Petrochemicals

& Specialties Agri-nutrients Hadeed Consolidated

Revenue 121,828,759 7,118,386 10,790,239 139,737,384

Depreciation, amortisation, impairment

and write-offs (18,405,496) (905,581) (1,274,261) (20,585,338)

Income from operations 13,814,438 2,014,403 (995,834) 14,833,007

Share of results of associates and joint

ventures (1,850,048) 254,699 - (1,595,349)

Finance cost, net (1,426,956)

Other expenses, net (128,396)

Income before zakat and income tax 11,682,306


Petrochemicals


Revenue 150,422,057 7,938,052 10,768,230 169,128,339

Depreciation, amortisation,

impairment and write-offs (13,636,068) (745,312) (1,120,185) (15,501,565)

Income from operations 33,723,610 2,263,615 293,143 36,280,368

Share of results of associates and

joint ventures 702,718 347,132 - 1,049,850

Finance cost, net (1,223,395)

Other income, net (423,755)

Income before zakat and income tax 35,683,068


Petrochemicals


Total assets 280,998,483 11,674,577 17,692,691 310,365,751

Total liabilities 92,219,642 2,295,442 4,599,345 99,114,429


Petrochemicals


Total assets 284,711,898 13,963,504 21,035,472 319,710,874

Total liabilities 90,775,228 3,037,431 4,461,740 98,274,399






92

36 Segment information (continued)

Geographical distribution of revenue


% %

KSA 24,893,545 17% 25,270,853 15%

China 24,934,405 18% 29,713,216 17%

Rest of Asia 30,446,811 22% 36,386,396 22%

Europe 32,247,394 23% 39,449,558 23%

Americas 12,409,745 9% 14,796,092 9%

Others (i) 14,805,484 11% 23,512,224 14%

139,737,384 100% 169,128,339 100%

The revenue information above is based on the locations of the customers.

(i) Others mainly includes sales made by certain subsidiaries to their foreign shareholders and for which

detailed geographical breakdown for final end consumer sales is not available with the Group.

Geographical distribution of property, plant and equipment


% %

KSA 133,034,221 82% 138,563,584 85%

Europe (ii) 14,217,886 9% 13,948,735 8%

Americas (ii) 14,244,967 8% 9,759,324 6%

Asia (ii) 1,488,871 1% 1,545,226 1%

Others (ii) 4,339 - 2,815 -

162,990,284 100% 163,819,684 100%

(ii) Significant value of property, plant and equipment in Europe is concentrated in the Netherlands, UK,

Germany and Spain; in the Americas, it is concentrated in the USA and in Asia, it is concentrated in China

and India. Others include countries in Africa and Oceania.






93

37 Financial risk management

Overview

The Group has exposure to the following risks from its use of financial instruments:

Credit risk

Liquidity risk

Market risk

Operational risk.

This note presents information about the Group’s exposure to each of the above risks, the Group’s

objectives, policies and processes for measuring and managing risk, and the Group’s management of

capital. Further quantitative disclosures are included throughout these consolidated financial statements.

Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk

management framework. The Board has established the Risk Management Committee, which is responsible

for developing and monitoring the Group’s risk management policies. The committee reports regularly to

the Board of Directors on its activities.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group,

to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management

policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s

activities. The Group, through its training and management standards and procedures, aims to develop a

disciplined and constructive control environment in which all employees understand their roles and

obligations.

The Group Audit Committee oversees how management monitors compliance with the Group’s risk

management policies and procedures, and reviews the adequacy of the risk management framework in

relation to the risks faced by the Group. The Group Audit Committee is assisted in its oversight role by

Internal Audit. Internal Audit undertakes both regular and ad-hoc reviews of risk management controls and

procedures, the results of which are reported to the Audit Committee.

37.1 Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument

fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers

and investment securities.

Financial instruments principally include cash and bank balances, trade and other accounts receivable,

derivative financial instruments, investments in securities, loans and advances, short term bank borrowings,

accounts payable, accrued expenses, long term debt and other liabilities.






94

37 Financial risk management (continued)

37.1 Credit risk (continued)

Trade receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.

However, management also considers the demographics of the Group’s customer base, including the

default risk of the industry and country in which customers operate, as these factors may have an influence

on credit risk, particularly in the currently deteriorating economic circumstances. Also, geographically there

is no concentration of credit risk.

The Group trades only with recognised, credit worthy third parties. It is the Group’s policy that all

customers who wish to trade on credit terms are subject to credit verification procedures. Credit quality of

the customer is assessed based on an extensive credit rating scorecard. In addition, receivable balances

are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not

significant.

Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures

and control relating to customer credit risk management. Credit limits are established for all customers

using an internal and external rating criteria. Credit quality of the customer is assessed based on a credit

rating scorecard. Outstanding customer receivables are regularly monitored.

The Risk Management Committee has established a credit policy under which each new customer is analysed

individually for creditworthiness before the Group’s standard payment and delivery terms and conditions

are offered. The Group’s review includes external ratings, when available, and in some cases, bank

references. Purchase limits are established for each customer, which represents the maximum open amount

without requiring approval from the Risk Management Committee; these limits are reviewed quarterly.

Customers that fail to meet the Group’s benchmark creditworthiness may transact with the Group only on a

prepayment basis.

Investments

Management actively monitors credit ratings and given that the Group only has invested in securities with

high credit ratings, management does not expect any counterparty to fail to meet its obligations.

Credit risk quality

(i) Excludes investments in debt instruments.

31 December 2019

External Rating AA+ AA AA- A+ A A- Others

Carrying

value in the

statement of

financial

position

Bank balances and

time deposits 50,600 3,176,516 8,022,937 20,402,168 2,574,871 3,315,234 769,364 38,311,690

Investments in equity

instruments - - - 313,141 - - 732,868 1,046,009

Investments in debt

instruments 382,792 - - 2,049,246 - - - 2,432,038

Short-term

investments (i) - - 111,980 1,327,400 701,270 687,377 1,644,081 4,472,108

Total 433,392 3,176,516 8,134,917 24,091,955 3,276,141 4,002,611 3,146,313 46,261,845






95


37.1 Credit risk (continued)

Credit risk quality (continued)

(i) Excludes investments in debt instruments.

The credit ratings above are based on credit ratings issued by globally accepted credit rating agencies.

37.2 Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its

financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to

managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its

liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or

risking damage to the Group’s reputation.

The Group ensures that it has sufficient cash on demand to meet expected operational expenses, including

the servicing of financial obligations; this excludes the potential impact of extreme circumstances that

cannot reasonably be predicted, such as natural disasters. In addition, the Group maintains different lines

of credit.

The Group monitors its risk to a shortage of funds using forecasting models to model impacts of operational

activities on overall liquidity availability. The Group’s objective is to maintain a balance between continuity

of funding and flexibility through the use of bank overdrafts, the revolving credit facilities and other sources

of liquidity.

Concentrations arise when a number of counterparties are engaged in similar business activities, or

activities in the same geographical region, or have economic features that would cause their ability to meet

contractual obligations to be similarly affected by changes in economic, political or other conditions.

Concentrations indicate the relative sensitivity of the Group’s performance to developments affecting a

particular industry.

In order to avoid excessive concentrations of risk, the Group’s policies and procedures include specific

guidelines to focus on the maintenance of a diversified portfolio. Identified concentrations of credit risks are

controlled and managed accordingly. Selective hedging is used within the Group to manage risk

concentrations at both the relationship and industry levels.

31 December 2018

External Rating AA+ AA AA- A+ A A- Others

Carrying

value in the

statement of

financial

position

Bank balances and

time deposits 208,350 426,408 1,578,047 18,769,664 9,792,158 7,905,030 3,910,773 42,590,430

Investments in equity

instruments

- -

-

305,294

-

-

784,815 1,090,109

Investments in debt

instruments

388,404

-

-

2,668,285 -

- 12,401

3,069,090

Short-term

investments (i)

375,000 - -

2,660,318 2,350,990

212,500

3,641,481 9,240,289

Financial derivatives - - 11,038 3,424 - - 15,189 29,651

Total 971,754 426,408 1,589,085 24,406,985 12,143,148 8,117,530 8,364,659 56,019,569






96


37.2 Liquidity risk (continued)

The table below summarises the maturity profile of the Group’s financial liabilities based on contractual

undiscounted payments:

31 December 2019

Within 1 year

Between 1-5

years

More than 5

years Total

Debt (excludes lease liabilities) 6,765,474 25,299,920 9,488,034 41,553,428

Short-term borrowings 1,346,996 - - 1,346,996

Interest on loans and borrowings (i) 1,184,782 3,075,627 635,872 4,896,281

Trade payables 12,888,175 - - 12,888,175

Lease liabilities 1,599,096 4,165,074 2,904,960 8,669,130

Other liabilities 2,065,949 - - 2,065,949

25,850,472 32,540,621 13,028,866 71,419,959

(i) Excludes interest on lease

31 December 2018

Within 1 year

Between 1-5

years

More than 5

years Total

Debt (excludes lease liabilities) 4,098,894 35,426,705 6,019,150 45,544,749

Short-term borrowings 1,167,589 - - 1,167,589

Interest on loans and borrowings (i) 1,477,096 3,670,073 1,007,730 6,154,899

Trade payable 14,969,357 - - 14,969,357

Other liabilities 3,156,450 - - 3,156,450

Derivatives 381 - - 381

24,869,767 39,096,778 7,026,880 70,993,425

(i) Excludes interest on lease

37.3 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity

prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of

market risk management is to manage and control market risk exposures within acceptable parameters,

while optimising the return.

The Group buys and sells derivatives, and also incurs financial liabilities, in order to manage market risks.

All such transactions are carried out within the guidelines set by the Risk Management Committee. Generally

the Group seeks to apply hedge accounting in order to manage volatility in the consolidated statement of

income.






97


37.4 Equity price risk

The Group’s exposure to equity securities price risk arises from investments held by the Group and classified

as Investments in equity instruments carried at FVIS. To manage its price risk arising from investments in

equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with

the limits set by the Group.

Net income would increase/decrease as a result of gains/losses on equity securities classified as

investments in equity instruments carried at FVIS.

37.5 Currency risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency

exposures, primarily with respect to the fluctuations of the other currencies towards the SR pegged to the

USD. Foreign currency risk mainly arises from commercial transactions, investing and financing activities.

The Group’s policy requires all subsidiaries to conduct a regular review of currency exposures, however the

hedge decisions is delegated to Global Treasury, who manages the execution of all derivatives trading

centrally. In respect of monetary assets and liabilities denominated in foreign currencies, the Group ensures

that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when

necessary to address short-term imbalances.

The Group is currently exposed to currency risk on balances including receivable against sales, payable to

suppliers, placement with banks and borrowings that are denominated in a currency other than SR. The

currencies in which these transactions are primarily denominated includes US Dollar (USD), Euro (EUR),

British Pounds (GBP) and Chinese Yuan (CNY).

The currency risk on USD exposure is not considered significant by the Group as USD is pegged against SR.

The following table demonstrates the sensitivity of the Group to a reasonably possible change in the

exchange rate of SR to foreign currencies, with all other variables held constant, of the Group’s monetary

assets and liabilities net of hedges entered into for the year ended 31 December:

Gains (losses) through statement of

income for the year ended


Increase in EUR/SR (10%) 716,638 (72,031)

Increase in GBP/SR (10%) (20,968) (70,056)

Increase in CNY/SR (10%) 19,445 149,298






98


37.5 Currency risk (continued)

Exposure to foreign currency risk at the end of the reporting year can be shown as follows (converted in

SR ’000):


EUR GBP CNY

Cash and bank balances (including fixed term deposits) (1,698,140) (190,576) 240,958

Trade receivables 308,671 71,020 363,088

Other monetary receivables 5,514,973 - -

Debt 3,235,755 - -

Trade payables (194,876) (47,497) (72,888)

Other monetary payables - (42,625) (336,706)

Total net monetary exposure 7,166,383 (209,678) 194,452


EUR GBP CNY

Cash and bank balances (including fixed term deposits) 988,961 (892,503) 1,092,707

Trade receivables 3,577,112 284,624 477,540

Debt (3,216,375) - -

Trade payables (1,054,166) (92,681) (54,718)

Other monetary payables (1,015,837) - (22,547)

Total net monetary exposure (720,305) (700,560) 1,492,982

37.6 Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate

because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest

rates relates primarily to the Group’s long-term debt obligations with floating interest rates. The Group

manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings.

To lower volatility and increase predictability of interest expenses, the Group may enter into simple financial

derivatives such as interest rate swaps. During 2019 and 2018, the Group had no interest rate swaps

outstanding.

The following table demonstrates the sensitivity of the Group to a reasonably possible change in interest

rates, with all other variables held constant, of the Groups profit before tax (through the impact on floating

rate borrowings) for the year ended 31 December:

31 December 2019

Gains (losses) through the

consolidated statement of income

+100 bps -100 bps

3M SAIBOR (495) 495

6M SAIBOR (1,158) 1,158

9M SAIBOR - -

1M LIBOR - -

6M LIBOR (4,310) 4,310






99


37.6 Interest rate risk (continued)

31 December 2018

Gains (losses) through the

consolidated statement of income

+100 bps -100 bps

3M SAIBOR 114 (114)

6M SAIBOR (2,129) 2,129

9M SAIBOR (778) 778

1M LIBOR (94) 94

6M LIBOR (6,394) 6,394

37.7 Commodity risk

The Group is exposed to the impact of market fluctuations of the price of various inputs to production

including naphtha, benzene, natural gas and electricity. From time to time, the Group manages some

elements of commodity price risk through the use of fixed price contracts and derivative instruments.

37.8 Capital management

The primary objective to the Group’s capital management is to support its business and maximise

shareholder value.

The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market

confidence and to sustain future development of the business. The Group manages its capital structure and

makes adjustments to it, in light of change in economic conditions. The Board of Directors monitors the

return on capital, which the Group defines as result from operating activities divided by total shareholders’

equity, excluding non-redeemable preference shares and non-controlling interests. There were no changes

in the Group’s approach to capital management during the year. The Board of Directors also monitors the

level of dividends to ordinary shareholders and capital management. Neither the Group nor any of its

subsidiaries are subject to externally imposed capital requirements. The Group’s debt to equity ratio at the

end of the reporting year was as follows:


Total liabilities 99,114,429 98,274,399

Less: cash and bank balances (38,312,775) (42,590,820)

Net debt 60,801,654 55,683,579

Total equity 211,251,322 221,436,475

Debt to equity ratio as of 31 December 29% 25%

The net debt to equity ratio increased from 25% to 29% following the adoption of IFRS 16 Leases. Both net

debt and gross assets increased following the recognition of right of use assets and lease liabilities on 1

January 2019. See note 4.






100

38 Commitments and contingencies

Capital commitments

At 31 December 2019, the Group had commitments of SR 13.20 billion (31 December 2018: SR 9.92 billion)

relating to capital expenditures.

SABIC has an equity contribution commitment towards its 15% interest in MWSPC. As of 31 December 2019,

the outstanding commitment toward this investment amounts to SR 0.074 billion (31 December 2018: SR

0.07 billion). Pursuant to the terms of agreements with the other shareholders and external lenders, SABIC

has agreed to contribute additional funds to the project, under certain circumstances and to the extent

required, in the event of project cost over-runs.

SABIC also has an equity contribution commitment towards its 25% interest in Dussur. As at 31 December

2019, the outstanding commitment towards this investment amounts to nil (as at 31 December 2018: SR 0.28

billion).

The Group has entered into a 50/50 joint arrangement with ExxonMobil (through ExxonMobil Gulf Coast

Investment LLC) to design, construct and operate a jointly-owned ethylene cracker and two polymer units.

The project is expected to come on stream in 2022 or 2023.

The Group has signed agreements with vendors maturing over various years through 2025 for capital

commitment for the ongoing operations of its business. Under the terms of these agreements, the Group

has committed to contractually specified minimums over the contract periods.

Guarantees

SABIC has provided guarantees for bonds and certain term loans for certain subsidiaries which amounted

to SR 17.9 billion as of 31 December 2019 (31 December 2018: SR 29.4 billion).

Contingent assets

The Group has been granted call options to acquire shares in some joint ventures. Although the potential

exercise date is quite remote, an estimate of the fair value of the call options is approximately SR 0.16 billion

(2018: 0.19 billion).

Contingent liabilities

The Group’s bankers have issued, on its behalf, bank guarantees amounting to SR 3.17 billion (31 December

2018: SR 3.94 billion) in the normal course of business.

Leases

The following lease related amounts recognised in consolidated statement of income:

For the year ended

31 December 2019

Depreciation expense of right of use assets (Note 8) 1,603,705

Interest expense on lease liabilities (Note 30) 353,152

Expense related to short-term leases 168,993

Expense related to leases of low-value assets 13,912

Variable lease payments 140,535

The Group had total cash outflows for leases of SR 1.72 billion in 2019. The Group also had non-cash additions

to right of use assets and lease liabilities of SR 1.13 billion in 2019. The future cash outflows relating to leases

are disclosed in note 37.






101

38 Commitments and contingencies (continued)

Leases (continued)

Group as a lessor

Future minimum lease receivables under these contracts, together with the present value of the net

minimum lease payments, are as follows:

31 December 2019

Minimum

lease receivable

Present value


After one year but not more than five years 154,692 82,791

More than five years 185,045 137,821

Total minimum lease receivable 375,440 237,912

Less: amounts representing finance income (137,528) -

Present value of minimum lease receivable 237,912 237,912

31 December 2018

Minimum lease

receivable

Present value


After one year but not more than five years 132,851 84,306

More than five years 242,150 153,666

Total minimum lease receivable 412,920 256,075

Less: amounts representing finance income (156,845) -

Present value of minimum lease receivable 256,075 256,075

The Group is deemed as a lessor in certain supply contracts where the agreements convey the right to use

related equipment, mainly gas pipelines and other related accessories. The duration of the lease

agreements are between 15 to 20 years which are a significant majority of the useful lives of the related

assets. The lessor is responsible for maintenance and insurance of the assets.

Generally, there are minimum payments due from the lessee regardless of potential termination of the

agreements. Renewal of lease agreements are possible but are subject to mutual agreement.






102

39 Reclassification in comparative numbers

During the year, the Group reclassified certain balances as listed below, which are considered by

management a more accurate presentation and reflects the related nature. These reclassifications have no

impact on previously reported net income or retained earnings:

As per previously

reported

Reclassified

amounts

Amount of

reclassification

Consolidated statement of financial

position

Other non-current liabilities 2,156,437 1,384,327 (772,110)

Accruals and other current liabilities 13,016,884 13,396,473 379,589

Zakat and income tax payable 4,204,317 4,596,838 392,521

40 Appropriations

The Annual General Assembly (“AGA”), in its meeting held on 4 Shabaan 1440H (corresponding to 9 April

2019), approved cash dividends of SR 13.2 billion (SR 4.4 per share), which includes the interim cash dividends

amounting to SR 6.6 billion (SR 2.2 per share) for the first half of 2018, which has been recognised in equity

in the consolidated financial statements for the year ended 31 December 2018. The remaining of the dividend

declared of SR 6.6 billion has been recognised in the interim condensed consolidated financial statements

for the period ended 30 June 2019, which was made available for distribution in April 2019.

The AGA also approved Board of Directors’ remuneration of SR 1.8 million that is charged to general and

administrative expenses.

On 18 Ramadan 1440H (corresponding to 23 May 2019), SABIC declared interim cash dividends for the first

half of the year 2019 amounting to SR 6.6 billion (at SR 2.2 per share), which has been recognised in the

interim condensed consolidated financial statements for the period ended 30 June 2019, which was made

available for distribution in September 2019.

On 20 Rabi Thani 1441H (corresponding to 17 December 2019), the Board of Directors proposed a distribution

of cash dividends for the second half of the year 2019 amounting to SR 6.6 billion (at SR 2.2 per share). The

proposed dividends are subject to approval of the shareholders in the AGA in April 2020.

41 Subsequent events

In February 2020, the Group announced its intention to idle its Ultem plant in Spain to optimise its global

operations. The estimated impact, including restructuring charges, is estimated at SR 700 million.

On 3rd March 2020, the Group announced that it increased its share in Clariant from 24.99% to 31.5% as part

of its ongoing growth strategy to achieve a leadership position in the Specialties market. The completion of

the transaction is still subject to regulatory approvals.






103

42 Subsidiaries

SABIC Group’s subsidiaries are set out below:

Notes:

The country of incorporation is also their principal place of business.

The principal activities of majority of the Group’s subsidiaries are manufacturing, marketing and distribution of

petrochemical, specialties and related products except for SAFCO, AL BAYRONI and IBN AL-BAYTAR that are involved

in agri-nutrients business; and HADEED is involved in metal business.

YANSAB, SAFCO, and SAUDI KAYAN are public companies and listed on the Saudi Stock Exchange (Tadawul)

NUSANED and SANIC are newly established entities. Nusaned is involved in promoting local business in KSA and

provides financial and non-financial support. SANIC is established to facilitate the restructuring transaction of Agri-

Nutrients business.

SP. CHEM is 99% owned by Petrokemya and 1% owned by SIIC, and SOCC is 50% owned by SP. CHEM

Effective 1 October 2019, SADAF merged with PETROKEMYA.

SABCAT, SCFC and SHROUQ are in liquidation and controlled by the Liquidator.

Country of

incorporation

%

Shareholding

(direct and indirect)

as at 31 December 2019

%

Shareholding



SABIC Luxembourg S.à r.l. (“SLUX”) and its subsidiaries

(Note 42.1) Luxembourg 100.00 100.00

SABIC Industrial Investments Company (“SIIC”) and its

subsidiaries (Note 42.2) KSA 100.00 100.00

Arabian Petrochemical Company (“PETROKEMYA”) KSA 100.00 100.00

Saudi Iron and Steel Company (“HADEED”) KSA 100.00 100.00

Sabic Investment and Local Content Development

Company (“NUSANED”) KSA 100.00 -

SABIC Agri-Nutrients Investment Company (“SANIC”) KSA 100.00 -

International Shipping and Transportation Co. (“ISTC”) KSA 100.00 100.00

SABIC Supply Chain Services Limited Company (“SSCS”) KSA 100.00 100.00

Saudi European Petrochemical Company (“IBN ZAHR”) KSA 80.00 80.00

Jubail United Petrochemical Company (“UNITED”) KSA 75.00 75.00

National Chemical Fertiliser Company (“IBN AL-BAYTAR”) KSA 71.50 71.50

National Industrial Gases Company (“GAS”) KSA 70.00 70.00

Yanbu National Petrochemical Company (“YANSAB”) KSA 51.95 51.95

Saudi Methanol Company (“AR-RAZI”) (Note 22.1) KSA 75.00 50.00

Al-Jubail Fertiliser Company (“AL BAYRONI”) KSA 50.00 50.00

Saudi Yanbu Petrochemical Company (“YANPET”) KSA 50.00 50.00

National Methanol Company (“IBN-SINA”) KSA 50.00 50.00

Eastern Petrochemical Company (“SHARQ”) KSA 50.00 50.00

Al-Jubail Petrochemical Company (“KEMYA”) KSA 50.00 50.00

Saudi Methacrylates Company (“SAMAC”) KSA 50.00 50.00

Arabian Industrial Fibers Company (“IBN RUSHD”) KSA 48.07 48.07

Saudi Arabian Fertiliser Company (“SAFCO”) KSA 42.99 42.99

Saudi Kayan Petrochemical Company (“SAUDI KAYAN”) KSA 35.00 35.00

Saudi Speciality Chemicals Company (“SP. CHEM”) KSA 100.00 100.00

Saudi Organometallic Chemicals Company (“SOCC”) KSA 50.00 50.00

Saudi Petrochemical Company (“SADAF”) KSA - 100.00

SABIC Sukuk Company (“SUKUK”) KSA - 100.00

SABIC Industrial Catalyst Company (“SABCAT”) KSA - 100.00

Saudi Carbon Fibre Company (“SCFC”) KSA - 100.00

Saudi Japanese Acrylonitrile Company (“SHROUQ”) KSA - 100.00






104

42 Subsidiaries (continued)

42.1 SABIC Luxembourg S.à r.l. and its subsidiaries

(i) LE SABIC Innovative Plastics Australia Pty Ltd has been liquidated in 2019.

Country of

incorporation

%

Shareholding



%

Shareholding



Subsidiaries

SABIC Innovative Plastics Argentina SRL Argentina 100.00 100.00

SABIC Australia Pty Ltd. Australia 100.00 100.00

SABIC Innovative Plastics Australia Pty Ltd. (i) Australia - 100.00

SABIC Innovative Plastics Austria GmbH Austria 100.00 100.00

SABIC Innovative Plastics GmbH & Co. KG Austria 100.00 100.00

SABIC Innovative Plastics South America - Indústria e

Comércio de Plásticos Ltda Brazil 100.00 100.00

NV Pijpleiding Antwerpen-Limburg-Luik (PALL) Belgium 100.00 100.00

SABIC Belgium NV Belgium 100.00 100.00

SABIC Innovative Plastics Canada, Inc. Canada 100.00 100.00

SABIC Innovative Plastics (China) Co., Ltd. China 100.00 100.00

SABIC Innovative Plastics (Chongqing) Co., Ltd. China 100.00 100.00

SABIC Innovative Plastics International Trading

(Shanghai) Ltd. China 100.00 100.00

SABIC Innovative Plastics

Management (Shanghai) Co., Ltd. China 100.00 100.00

SABIC Innovative Plastics Shanghai Co., Ltd. China 100.00 100.00

SABIC (Shanghai) Trading Co. Ltd. China 100.00 100.00

SABIC (China) Research & Development Co. Ltd. China 100.00 100.00

SABIC (Shanghai) Industry Co. Ltd. China 100.00 100.00

SABIC Innovative Plastics Czech s.r.o. Czech Republic 100.00 100.00

SABIC Innovative Plastics Denmark Aps Denmark 100.00 100.00

SABIC Nordic A/S Denmark 100.00 100.00

SABIC Innovative Plastics Finland Oy Finland 100.00 100.00

SABIC France S.A.S. France 100.00 100.00

SABIC Innovative Plastics France S.A.S. France 100.00 100.00

SABIC Deutschland GmbH Germany 100.00 100.00

SABIC Holding Deutschland GmbH Germany 100.00 100.00

SABIC Innovative Plastics GmbH Germany 100.00 100.00

SABIC Innovative Plastics Holding Germany GmbH Germany 100.00 100.00

SABIC Polyolefine GmbH Germany 100.00 100.00

SABIC Greece M.E.P.E. Greece 100.00 100.00

SABIC Innovative Plastics Hong Kong Ltd. Hong Kong 100.00 100.00

SABIC Innovative Plastics SIT Holding Ltd. Hong Kong 100.00 100.00

SABIC Innovative Plastics Taiwan Holding Ltd. Hong Kong 100.00 100.00






105


42.1 SABIC Luxembourg S.à r.l. and its subsidiaries (continued)

Country of

incorporation

%

Shareholding



%

Shareholding



Subsidiaries

SABIC Hungary Kft. Hungary 100.00 100.00

SABIC Innovative Plastics Kereskedelmi Kft. Hungary 100.00 100.00

SABIC India Pvt Ltd. India 100.00 100.00

SABIC Innovative Plastics India Private Ltd. India 100.00 100.00

SABIC R&T Pvt Ltd. India 100.00 100.00

SABIC Innovative Plastics Italy Srl Italy 100.00 100.00

SABIC Italia Srl Italy 100.00 100.00

SABIC Sales Italy Srl Italy 100.00 100.00

SABIC Japan Ltd. Japan 100.00 100.00

SABIC Korea Ltd. Korea 100.00 100.00

SABIC Luxembourg S.à r.l. Luxembourg 100.00 100.00

SABIC Innovative Plastics Malaysia Sdn Bhd Malaysia 100.00 100.00

SABIC Innovative Plastics Mexico S de RL de CV Mexico 100.00 100.00

SABIC Innovative Plastics Servicios Mexico S de RL de CV Mexico 100.00 100.00

BV Snij-Unie HiFi Netherlands 100.00 100.00

FRT B.V. Netherlands 95.00 95.00

FRT Tapes B.V. Netherlands 100.00 100.00

SABIC Capital B.V. Netherlands 100.00 100.00

SABIC Capital I B.V. Netherlands 100.00 100.00

SABIC Capital II B.V. Netherlands 100.00 100.00

SABIC Innovative Plastics GP B.V. Netherlands 100.00 100.00

SABIC Innovative Plastics Holding B.V. Netherlands 100.00 100.00

SABIC Innovative Plastics Utilities B.V. Netherlands 100.00 100.00

SABIC Licensing B.V. Netherlands 100.00 100.00

SABIC Limburg B.V. Netherlands 100.00 100.00

SABIC Sales Europe B.V. Netherlands 100.00 100.00

SABIC Petrochemicals B.V. Netherlands 100.00 100.00

SABIC Ventures B.V. Netherlands 100.00 100.00

SABIC Mining B.V. Netherlands 100.00 100.00

Petrochemical Pipeline Services B.V. Netherlands 100.00 100.00

SABIC Europe B.V. Netherlands 100.00 100.00

SABIC International Holdings B.V. Netherlands 100.00 100.00

SABIC Innovative Plastics B.V. Netherlands 100.00 100.00

SABIC Global Technologies B.V. Netherlands 100.00 100.00

SABIC Innovative Plastics Poland Sp. Z o.o. Poland 100.00 100.00

SABIC Poland Sp. Z o.o. Poland 100.00 100.00

LLC SABIC Eastern Europe Russia 100.00 100.00

SABIC Innovative Plastics Russia Z o.o. Russia 100.00 100.00






106


42.1 SABIC Luxembourg S.à r.l. and its subsidiaries (continued)

Note:

Black Diamonds Structures, LL; as the Group acquired control over Black Diamond as at 1 January 2018 and due to

change in control, this equity investment is now consolidated from 1 January 2018 (Note 10). This investment has

been sold dated 2nd February 2020.

SABIC is working on carve-out projects that will impact the structure of the SLUX legal entities and business model in

FY 2020, as a project is expected to be completed in 2020. The project represents the carve-out of the majority of the

current Specialty business called High-Performance Polymers (“HPP”) which is embedded in the Innovative Plastics

group. This carve-out will result in the creation of approximately 36 additional legal entities.

Country of

incorporation

%

Shareholding



%

Shareholding



Subsidiaries

SABIC Innovative Plastics (SEA) Pte. Ltd. Singapore 100.00 100.00

SABIC Innovative Plastics Holding Singapore Pte.

Ltd. Singapore

100.00 100.00

SABIC Innovative Plastics Singapore Pte. Ltd. Singapore 100.00 100.00

SABIC Asia Pacific Pte Ltd Singapore 100.00 100.00

SABIC Innovative Plastics Espana ScpA Spain 100.00 100.00

SABIC Innovative Plastics GP BV, Sociedad en

Comandita Spain 100.00 100.00

SABIC Sales Spain SL Spain 100.00 100.00

SABIC Marketing Ibérica S.A. Spain 100.00 100.00

Saudi Innovative Plastics Sweden AB Sweden 100.00 100.00

SABIC Innovative Plastics (Thailand) Co. Ltd. Thailand 100.00 100.00

SABIC Global Ltd. UK 100.00 100.00

SABIC Tees Holdings Ltd. UK 100.00 100.00

SABIC Innovative Plastics ABS UK Ltd. UK 100.00 100.00

SABIC Innovative Plastics Ltd. UK 100.00 100.00

SABIC UK Ltd. UK 100.00 100.00

SABIC UK Pension Trustee Ltd. UK 100.00 100.00

SABIC UK Petrochemicals Ltd. UK 100.00 100.00

Exatec, LLC US 100.00 100.00

Mt. Vernon Phenol Plant Partner US 51.00 51.00

SABIC Americas Inc. US 100.00 100.00

SABIC Innovative Plastics Holding US LP US 100.00 100.00

SABIC Innovative Plastics Mt. Vernon, LLC US 100.00 100.00

SABIC Innovative Plastics US LLC US 100.00 100.00

SABIC Petrochemicals Holding US, Inc. US 100.00 100.00

SABIC Ventures US Holdings LLC US 100.00 100.00

SABIC US Projects LLC US 100.00 100.00

SABIC Uruguay SA Uruguay 100.00 100.00

SABIC Vietnam Ltd. Vietnam 100.00 100.00

SABIC Americas Growth LLC US 100.00 100.00

SABIC US Methanol LLC US 100.00 100.00

Black Diamonds Structures, LL US 50.10 50.10






107


42.2 SIIC Group Subsidiaries

Notes:

On 27 December 2018, SABIC transferred its 99% ownership of SSCS to the SIIC.

GMC LLC was established during 2018 and is engaged in providing administrative services to the Group’s global

assignees and GMC is currently under liquidation.

Country of

incorporation

%

Shareholding



%

Shareholding



SABCAP Insurance Limited (“SABCAP”) Guernsey 100.00 100.00

SABIC Petrokemya Ticaret Limited (“SABIC

TURKEY”)

Turkey 100.00 100.00

SABIC Middle East Offshore Company (“SABIC

MIDDLE EAST”) Lebanon 100.00 100.00

SABIC South Africa South Africa 100.00 100.00

SABIC Africa for Trading & Marketing (“SABIC

AFRICA”)

Egypt 100.00 100.00

SABIC Morocco Morocco 100.00 100.00

SABIC Global Mobility Company (“GMC”) UAE 100.00 100.00

SABIC Mobility Company (“GMC LLC”) UAE 100.00 100.00

SABIC Tunisia Tunisia 100.00 100.00

SABIC Kenya Kenya 100.00 100.00

SABIC (Pvt.) Pakistan Pakistan 100.00 100.00

International Shipping and Transportation Co.

(“ISTC”)

KSA 99.00 99.00

SABIC Supply Chain Services Limited Company

(“SSCS”)

KSA 99.00 -

SABIC Terminal Services Company (“SABTANK”) KSA 90.00 90.00

Jubail Chemical Storage and Services Company

(“CHEMTANK”) KSA 75.00 75.00






108

43 Investment in associates and joint arrangements

Below is the listing of the Group’s investment in associates and joint arrangements. These are strategic investments for

the Group.

Notes:

The country of incorporation is also their principal place of business.

CLARIANT; during 2018, SABIC acquired 24.99% ownership in Clariant, a global specialty chemical company listed at

the Swiss Stock Exchange. (Note 10.1)

The Group participates in following Joint Operations:

o USG (Geleen, the Netherlands), which is operated jointly with other stakeholders to produce utilities for a

production site

o GCGV (Houston, USA), a cooperation with ExxonMobil Chemical to investigate the feasibility of constructing an

ethane steam cracking facility and downstream plants.

The Group holds a 50% share in each of these joint operations and controls them jointly with the respective partners.

The partners ensure the ongoing financing of the companies, either by the utilities directly sold to the partners or

sharing the costs.

Country of

incorporation

Principal activities

%

Shareholding

(direct and

indirect)

as at 31

December 2019

%

Shareholding

(direct and

indirect)

as at 31

December 2018

Associates

Gulf Petrochemical Industries Company

(“GPIC”) Bahrain Petrochemical 33.33 33.33

Gulf Aluminium Rolling Mills Company

(“GARMCO”) Bahrain Aluminium 30.40 30.40

Ma’aden Phosphate Company (“MPC”) KSA Agri-Nutrients 30.00 30.00

Power and Water Utilities Company for Jubail

and Yanbu (“MARAFIQ”) KSA Utilities 24.81 24.81

Aluminium Bahrain BSC (“ALBA”) Bahrain Aluminium 20.62 20.62

National Chemical Carrier Company (“NCC”) KSA Transportation 20.00 20.00

Ma’aden Wa’ad Al Shamal Phosphate

Company (“MWSPC”) KSA Agri-Nutrients 15.00 15.00

Saudi Arabian Industrial Investment Company

(“DUSSUR”) KSA Investments 25.00 25.00

Clariant AG (“CLARIANT”) Switzerland Specialty chemical 24.99 24.99

Saudi Acrylic Butanol Company (“SABUCO”) KSA Petrochemical 33.33 33.33

Joint Ventures

SINOPEC/SABIC Tianjin Petrochemical

Company Limited China Petrochemical

50.00

50.00

SABIC SK Nexelene Company Singapore Petrochemical 50.00 50.00

Cosmar Inc. (“COSMAR”) USA Petrochemical 50.00 50.00

Joint Operations

Utility Support Group (“USG”) B.V. Netherlands Petrochemical 50.00 50.00

Gulf Coast Growth Venture LLC (“GCGV”) USA Petrochemical 50.00 50.00

saudi basic industries corporation (sabic) … 2019...of the transaction, saudi aramco will own 70%...

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